How to Calculate EFN

Calculating a business's EFN, also know as "external financing needed" or "external funds needed," is an important aspect of balancing a company budget. When reading a budget, it is critical to identify the external money that needs to be raised to support the sales output forecast that is outlined in the budget. The EFN may come from debt and loans, or investments from external financiers. Learn how to calculate EFN to ensure your company budget is accurate.

Calculating a business's EFN, also know as "external financing needed" or "external funds needed," is an important aspect of balancing a company budget. When reading a budget, it is critical to identify the external money that needs to be raised to support the sales output forecast that is outlined in the budget. The EFN may come from debt and loans, or investments from external financiers. Learn how to calculate EFN to ensure your company budget is accurate.

Collect your business's financial records. If you are attempting to calculate EFN for a third-party business, solicit the records from the business's accounting office. You will need to collect accounting records and statements from financial institutions. If the company is publicly listed on a national stock exchange, you may also locate its financial records on its website.

Create a an Excel spreadsheet.

Type the company's assets into one column of the Excel spreadsheet, with each asset's numerical value listed in a separate cell. Assets that should be taken into account include such items as value of real estate, equipment, stocks and cash.

Click the empty cell at the bottom of the assets column. Click "Autosum" in the top toolbar (the button with the "E" symbol). Excel will now add all the assets and generate the automated sum. Now, anytime you change the value of an asset or enter a new asset, the cell at the bottom of the column will reflect the total sum. This saves you time if you need to change the financial information you've already entered.

Repeat Steps 3 and 4, this time for the value of the company's liabilities. This is the second aspect of trying to calculate EFN. Liabilities may include such financial information as outstanding accounts, back taxes and current debt held by the company.

Calculate the total monetary value of shareholder equity, which is the value of the company's stocks.

Add the value of a company's liabilities with the monetary value of its shareholder equity. Subtract this amount from the assets (calculated in Step 4). The difference is the company's EFN. The company must raise this amount in external funds to balance its budget, typically by soliciting external investments from other companies.

About the Author

Joshua Duvauchelle is a certified personal trainer and health journalist, relationships expert and gardening specialist. His articles and advice have appeared in dozens of magazines, including exercise workouts in Shape, relationship guides for Alive and lifestyle tips for Lifehacker. In his spare time, he enjoys yoga and urban patio gardening.