The term "additional funds needed (AFN)" is generally defined as follows:
a. The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.
b. The amount of assets required per dollar of sales.
c. A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant.
d. Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock, to support operations.
e. Funds that are obtained automatically from routine business transactions.

Explanation: In simple words, additional funds refers to the funds that a company needs for financing a specific project or other such purposes. These funds are usually procured when there are no internal funds left in the company like retained earnings etc.

Thus, these funds are procured from external sources like issuing debt securities or by offering additional equity etc.

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