Return to the assumption that the company had $3 million in assets at the end of 2006, but now assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Why is this AFN different from the one you found in given Problem?
Problem:
Define each of the following terms:
a. Operating plan; financial plan; sales forecast
b. Pro forma financial statement; percent of sales method
c. Spontaneously generated funds
d. Additional funds needed (AFN); AFN formula; capital intensity ratio
e. Lumpy assets.