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This week the lesson is Financial Planning. The text focuses on two approaches for coming up...

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Finance

This week the lesson is Financial Planning. The text focuses ontwo approaches for coming up with an answer to the same question;how much external financing will be needed next year. One is thefinal step in projecting financial statements for the next periodand the other is the AFN Equation. Which approach do you considersuperior and why?

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The Projected financial statements approach can be considered superior for the following reasons The AFN equation is AFN Assets Sales x sales Spontaneous liabilities Sales x sales Projected sales x Profit margin x 1Dividend payout ratio As can be seen the AFN equation assumes that each component of total assets each component of spontaneous liabilites vary    See Answer
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Transcribed Image Text

This week the lesson is Financial Planning. The text focuses ontwo approaches for coming up with an answer to the same question;how much external financing will be needed next year. One is thefinal step in projecting financial statements for the next periodand the other is the AFN Equation. Which approach do you considersuperior and why?

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