Tag: Three Statement Model

A three statement model is called when your financial model results in the three financial statements: Income Statement, Balance Sheet and Cash Flow Statement by interlinking them dynamically.

Why do you need a Three Statement Model?
It is quite easy, the alternative of building a three statement model would be to build a direct cash flow model. So what is wrong with that? The problem with that is that you can perform your analysis only to a certain degree, especially tax and net working capital calculations might not be very precise. Also you are running the risk creating a cash flow forecast which might simply be unrealistic as you haven't looked at the implied financial statements. So a more precise way to predict the future financial performance of a company is to build a three statement model.

Advantages of Modelling the Three Financial Statements
The main advantage is that the quality of your model increases. If you create a dynamic three statement model, you normally start with building the Income Statement. The Balance Sheet is mostly driven how you project the Income Statement, as all net working capital positions such as receivables,  inventory, payables depend on your projected revenues and cost of goods sold. Depending on your projection, more or less financing is required. In addition, in many models the investment in Fixed Assets (CAPEX) drives sales, so that's now where your interlinking comes handy as you can see the effect of your assumptions in an instance on all three financial statements. The other main quality advantage is that once you have built the three financial statements, you can properly calculate all financial ratios. This opens up new possibilities as now you can check your financial model in an analytical way by simply analysing the financial ratios and the reasons why provide these results. This avoids that you have to go through the model checking it line by line (which can be an impossible task).

Our Inventory of Three Statement Models
At eFinancialModels we offer many Excel model templates in the form of comprehensive and fully dynamic three statement models. Find a selection of those on this page.

The three statement model provides a simple template in Excel to forecast the three financial statements over the next 5 years: Income Statement, Balance Sheet, Cash Flow Statement

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This is a Startup Financial Model Template in Excel for a new Health Care Chain with the objective to prepare a budget and forecast for the next 5 years, project the resulting financial statements -…

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The financial model is a pro-forma financial projection in Excel for a startup airline. It contains 5 year monthly rolling projections, yearly financial projections, breakeven analysis, valuation and funding section

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The Gas Station Financial Model provides you with a framework to plan your new gas station by projecting the financials over a period of 10 years, calculate monthly breakeven for gas sales, calculate IRR's and…

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This Financial Model for Mobile Apps provides an easy way to forecast the financial performance for an App sold in the App Stores and deriving revenues from paid downloads, advertisement and subscriptions.

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The SaaS Financial Model provides a simple way to derive the financial forecast for a Software as a Service (SaaS) internet company. The Financial Model calculates the DCF Value, IRR, Breakeven, ARPU, Customer Lifetime Value…

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