Where Do You Plug the EFN on a Balance Sheet?

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Figure out the EFN, or external financing needed, on a balance sheet by calculating the increase in assets needed to support the increase of revenue and subtracting the increase in liabilities. Consult a financial analyst to figure out EFN with information from a certified public accountant and personal financial planner in this free video on finances.

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Video Transcript

Hi, my name is Miranda Chook and I'm a CPA. EFN or external financing needed is a way of estimating additional funds a company may need to raise in order to support a forecast increase in revenues. There are on-line models or equations to help you calculate this, you basically solve for X. Now the theory is that your budgets, they usually start with some kind of X percentage increase in revenues for the next year. So this equation takes that percentage increase in revenues and then calculates an increase in assets that is needed to support that increase in revenues, minus the increase in liabilities and the increase in retained ownings and the result is EFN, external financing needed. Now you can also make adjustments to this equation or model depending on what your assumptions are for manufacturing capacity. Now for more information, contact a financial analyst who is experienced with these types of calculations and can make it more specific to your circumstances.

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