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21 December, 08:09

Weston's financial planning model shows assets are projected to increase by $2.7 million while liabilities and equity increase by $1.5 million. What is the external financing need (EFN) ?

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  1. 21 December, 10:48
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    The external financing requirement is $ 1.2 million.

    Explanation:

    The accounting equation is asset = liability + equity. In simple words any increase in one side of balance sheet (i. e asset) will result in increase in other side of balance sheet (i. e equity + liability) and vice versa.

    So if assets are projected to increase by $ 2.7 million than equity and liability is also required to increase by same. As equity is increased by $ 1.5 million, the liability/external financing is calculated as follow

    Asset = Liability + Equity

    Liability = $ 2,700,000 - $ 1,500,000

    Liability = $ 1.2 million
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Home » Business » Weston's financial planning model shows assets are projected to increase by $2.7 million while liabilities and equity increase by $1.5 million. What is the external financing need (EFN) ?
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