External Funding Required

External Funding required is used to determine the amount of external funding that a company will need based on the change in balance sheet values from one year to another. As assets increase, equity or liabilities must increase as well. If assets grow from one year to the next, then either current liabilities or retained earnings must grow by the same amount. If not, then external funding is required, and the company will either borrow debt, or sell equity to finance the growth.

External Funding Required Definition

External Funding Required is the amount of extra cash that a company will need for the next year based on the pro forma financial statements.