3-Statement Financial Model
The foundation of corporate finance — a fully integrated 3-statement model with 13 worksheets linking income statement, balance sheet, and cash flow statement.
Click the tabs at the bottom to navigate between worksheets.
The three-statement financial model is the cornerstone of financial analysis. Every DCF valuation, every LBO model, and every M&A analysis starts with a properly built 3-statement model. Getting this right is essential — and getting it wrong can cascade errors through every downstream analysis.
This model provides a clean, auditable framework that follows best practices used by investment banks, private equity firms, and corporate finance teams worldwide. Revenue builds bottom-up from granular assumptions. Operating expenses tie to logical drivers. The balance sheet balances. The cash flow statement reconciles. And built-in error checks catch mistakes before they become problems.
What's Inside
The model contains 13 integrated worksheets. Here's what each one does and why it matters.
Cover
Professional model cover with company name, date, version tracking, and navigation links. Covers company and model information, version control and quick navigation.
Assumptions
Central assumptions page that drives the entire model. Change inputs here and watch the three statements update automatically. Covers revenue growth rates, margin assumptions, working capital days, capital expenditure plans and tax rate and debt terms.
Revenue Build
Bottom-up revenue model that builds total revenue from business segments, products, or customer cohorts. Covers segment-level revenue drivers, volume × price decomposition, growth rate assumptions and revenue mix analysis.
COGS & OpEx
Detailed cost structure with cost of goods sold and operating expense line items tied to revenue or fixed assumptions. Covers variable vs. fixed cost split, cost as % of revenue drivers, headcount-driven expenses and r&d and sga detail.
Income Statement
Full income statement from revenue through net income, with clear subtotals for gross profit, EBITDA, EBIT, and EBT. Covers revenue through net income, gross, ebitda, ebit margins, interest expense from debt schedule and tax calculation with nols.
D&A Schedule
Tracks existing asset depreciation and new capex depreciation using straight-line or custom methods. Covers existing asset roll-forward, new capex depreciation, useful life assumptions and total d&a for income statement.
Working Capital
Models changes in working capital based on days outstanding assumptions, driving the cash flow impact. Covers accounts receivable (dso), inventory (dio), accounts payable (dpo) and net working capital change.
Debt Schedule
Detailed debt amortization and interest calculation for each debt tranche. Covers multiple debt facilities, mandatory and optional amortization, interest rate calculations and cash sweep mechanics.
Balance Sheet
Complete balance sheet that balances every period. Assets = Liabilities + Equity, with the cash balance as the plug. Covers current and non-current assets, working capital accounts, debt and equity detail and retained earnings roll-forward.
Cash Flow Statement
Indirect method cash flow statement reconciling net income to ending cash balance. Covers operating cash flow from net income, working capital adjustments, investing activities (capex) and financing activities (debt, equity).
Ratios & KPIs
Automated calculation of key financial ratios and performance indicators across all projection years. Covers profitability ratios (margins, roe, roa), leverage ratios (debt/ebitda, coverage), efficiency ratios (asset turnover) and liquidity ratios (current, quick).
Sensitivity
Two-way data tables testing the impact of key assumptions on critical outputs. Covers revenue growth vs. margin sensitivity, impact on free cash flow, leverage ratio scenarios and custom sensitivity inputs.
Error Checks
Automated validation sheet that flags any model errors — balance sheet imbalances, circular references, or broken links. Covers balance sheet balance check, cash flow reconciliation, sign and magnitude checks and link integrity verification.
Key Formulas & Methods
The model is built on established quantitative methods used by professionals worldwide.
Free Cash Flow
FCF = EBIT(1-t) + D&A − ΔWC − CapEx
The cash available to all capital providers after operating expenses, taxes, reinvestment, and working capital needs.
Days Sales Outstanding
DSO = (Accounts Receivable / Revenue) × 365
Measures how quickly the company collects payment from customers. Drives the AR line on the balance sheet.
Interest Coverage
Coverage = EBITDA / Interest Expense
Key credit metric showing how many times the company can cover its interest payments from operating earnings.
Return on Equity
ROE = Net Income / Average Shareholders' Equity
Measures profitability relative to shareholder investment. A key metric for equity investors.
How to Build This Model
Understanding how a model is constructed helps you customize it with confidence. Here is the methodology behind this template and what matters most at each stage.
1.Start with Historical Financials and Normalize
Every credible financial model is anchored in historical data. Gather 3-5 years of audited financial statements and reformat them into a consistent, model-friendly structure. Normalize for one-time items (restructuring charges, asset sales, litigation settlements) so that the historical base reflects recurring, operational performance. Calculate key ratios and margins over the historical period — these patterns inform your projection assumptions. The historical section is not just context; it is the evidence base that makes your projections defensible.
2.Build Revenue from Business-Specific Drivers
Revenue is the most important and hardest-to-forecast line in any financial model. Avoid top-down approaches ("revenue grows 10% per year") in favor of bottom-up builds tied to specific business drivers. For a SaaS company: users × ARPU × retention. For a retailer: stores × revenue per store × same-store growth. For a manufacturer: volume × price per unit × product mix. This granularity forces you to think about what actually drives the business and produces assumptions that can be challenged, tested, and refined with real operating data.
3.Link the Three Statements Through Working Capital and Debt
The integration between the three financial statements is what separates a real model from three independent spreadsheets. Net income flows from the income statement to retained earnings on the balance sheet. Depreciation from the income statement adjusts cash flow from operations. Working capital changes (driven by days outstanding assumptions) affect both the balance sheet and cash flow. Debt issuance and repayment affect the balance sheet and create interest expense on the income statement. Get these linkages right and the model becomes a self-consistent system where every dollar is accounted for.
4.Use Cash as the Balancing Plug
In a properly built model, one item must serve as the "plug" that makes the balance sheet balance. The standard approach uses cash as this plug — after calculating all other balance sheet items from their respective drivers, cash equals total assets minus all non-cash items minus total liabilities minus equity. This means your cash balance is an output, not an input, which is powerful: it tells you whether the company generates or consumes cash under your projection assumptions. If cash goes negative, the company needs external financing — a critical insight for credit and equity analysis alike.
5.Validate with Error Checks and Sensitivity Analysis
Before using the model for any decision, validate it rigorously. Confirm the balance sheet balances every period (assets = liabilities + equity, with zero tolerance for rounding errors). Verify the cash flow statement reconciles to the change in cash on the balance sheet. Check that all ratios are within reasonable ranges. Then stress-test the model with sensitivity analysis — vary revenue growth, margins, and working capital assumptions to understand the range of possible outcomes. A model that hasn't been validated is a liability; one that has been thoroughly tested is an asset that supports confident decision-making.
Who Is This For?
This model is designed for a range of professionals and use cases.
Financial Analysts. Build company projections for valuation, credit analysis, or strategic planning with a proven framework.
Investment Banking Analysts. Use as the foundation for DCF, LBO, and M&A models with clean, auditable structure.
FP&A Teams. Create budget models and long-range plans that integrate all three financial statements.
Private Equity Associates. Model portfolio company financials and test operating improvement scenarios.
Entrepreneurs & CFOs. Build investor-ready financial projections for fundraising or board presentations.
Finance Students. Master the most important skill in finance — building an integrated financial model from scratch.
Why Use This Model?
- —Fully integrated model — change one assumption and all three statements update automatically
- —Built-in error checks catch balance sheet imbalances and broken formulas
- —Bottom-up revenue build provides granular, defensible projections
- —Working capital model driven by days outstanding for realistic cash flow forecasting
- —Debt schedule handles multiple tranches with different terms and amortization
- —Sensitivity analysis lets you stress-test key assumptions instantly
- —Clean, color-coded formatting follows Wall Street modeling best practices
- —Ready to use as foundation for DCF, LBO, or M&A analysis
Frequently Asked Questions
Tagged: financial model · three statement · income statement · balance sheet · cash flow · financial projections · revenue build · working capital · debt schedule