Is it possible for the calculated AFN to be negative? If so, what would this imply?

A negative additional financing needed (AFN) implies that an increase in spontaneous liabilities and increase in retained earnings of a firm is more than an increase in its investments during a year. This means that the firm is having a higher profitability and not dependent on external finance as far more funds are available internally than what it needs to carry on its operations.

Verified Answer

Yes, the additional financing needed can be negative. This implies that a firm has more funds than what is needed to finance its operations.