who determine the future of firms' managers. financial forecasting process is to determine the financing requirements through the AFN equation. Additional funds needed are the amount of capital (interest-bearing debt and preferred and common stock) that will be necessary to acquire the required assets. The AFN equation approximates the funds needed assuming that ratios The AFN equation is written as follows: AdditionalProjectedSpontaneousIncreaseinfunds=increaseincreaseinretainedneeded,orAFNinassetsliabilitiesearningsAFN=(A0/S0)S(L0/S0)SMS1(1-Payout) The AFN equation shows the relationship of Rapidly growing companies require larger increases in assets; other things held constant, so of assets required per dollar of sales. Companies with higher assets-to-sales ratios require more assets for a given increase in sales, hence a funds arise out of normal business operations from its suppliers, employees, and the government that reduce the firm's need for external financing. The the profit margin, the larger the net income available to support increases in assets, hence the that is reinvested in the firm, and it is calculated as 1 minus the The higher the the need for external financing. The ratio, the lower the firm's AFN. The ratio is the proportion of net income maximum achievable arowth rate without the firm having to raise external funds. In other words, it is the arowth rate at which the firm's AFN equals zero