# 3 Statement Model Example Build a 3 statement financial model with linked income statement, balance sheet, and cash flow statement, without stitching the workbook together manually. - Canonical: https://finamodel.com/examples/3-statement-model - Excel download: https://finamodel.com/templates/3-statement.xlsx - Category: Corporate Finance - Model type: Operating model - Difficulty: Beginner - Audiences: CFOs & FP&A, Founders & operators, Founders, FP&A teams, Analysts, Consultants - Tags: forecasting, budgeting, balance sheet, cash flow, financial statements ## Overview A 3-statement financial model integrates income statement, balance sheet, and cash flow forecasts into a single coherent framework. This model answers what a company's profitability, financial position, and liquidity look like over a multi-year horizon by linking revenue drivers to operating expenses, working capital mechanics, debt schedules, and balance sheet reconciliation. All three statements flow through linked formulas: revenue feeds COGS and OpEx, operating results impact retained earnings and cash, and debt repayment reduces liabilities while cash balances tie out perfectly each period. Used by investors, lenders, and corporate planners to model the complete financial trajectory of an operating business. The workbook structure includes segmented revenue build with explicit forecast drivers, detailed operating expense assumptions, working capital mechanics using days sales outstanding, days inventory outstanding, and days payable outstanding, a full debt schedule with interest expense and amortisation, and balance sheet validation rows that confirm assets equal liabilities plus equity. Every formula chains through the three statements: income flows to the balance sheet as retained earnings, which determines the opening cash for the cash flow statement, completing the cycle. Investment committees, M&A advisors, and corporate development teams use integrated 3-statement models as the backbone for fairness opinions, valuation sensitivity analysis, and covenant monitoring. The model structure ensures all stakeholders see the same numbers regardless of which statement they reference. ## What's included - Integrated income statement, balance sheet, and cash flow statement - Forecast assumptions and operating drivers - Working capital mechanics - Debt and cash flow schedule - Balance checks and linked outputs - Segmented revenue build with forecast drivers - Detailed operating expense assumptions - Working capital mechanics using DSO, DIO, and DPO - Debt schedule, interest, and repayment logic - Balance sheet check and cash flow reconciliation ## 3 Statement Model: How the Integrated Financial Template Works This 3 statement model template provides a fully-linked five-year projection of the income statement, balance sheet, and cash flow statement for a single operating entity. It includes supporting debt and fixed-asset schedules, ratio analysis, scenario toggles, and integrity checks, making it suitable for CFO-level review and downstream DCF or LBO consumption. ### Key Operating Drivers Behind the Projections Revenue is built from three segments, each starting with a base revenue and applying scenario-sensitive annual growth rates; segment three can be disabled by leaving its base at zero. Cost of goods sold is set as a percentage of each segment's revenue. - Operating expenses follow a function-based structure covering sales and marketing, research and development, and general and administrative, with separate full-time-equivalent counts, average salaries, FTE growth rates, and non-headcount budgets. Salaries inflate annually, payroll loadings for employer taxes and benefits are applied, and stock-based compensation is set as a percentage of revenue. - Working capital drivers include days sales outstanding, days inventory outstanding, and days payables outstanding to derive accounts receivable, inventory, and accounts payable, along with other balances such as prepaid expenses and deferred revenue. Capital expenditure is split into maintenance and growth components, each driven by a percentage of revenue. Debt inputs cover term loan amortisation, revolver mechanics, and covenant thresholds, while tax includes a scenario-sensitive rate and net operating loss carryforward. ### How the Three Statements Flow Together The model follows a fully integrated calculation flow where each statement feeds the others. Net income from the income statement drives retained earnings on the balance sheet and the starting point of the cash flow statement. - Non-cash items like depreciation and amortization and stock-based compensation are added back in the cash flow from operations, and stock-based compensation is also credited to common equity. Working capital changes on the balance sheet are captured as sources or uses of cash in the cash flow statement. - The debt schedule calculates interest expense, depreciation, and capital expenditure, which are pulled into the income statement, balance sheet, and cash flow statement. Interest income is computed on prior-period cash to avoid circularity. The cash flow statement's closing cash ties directly to the balance sheet cash balance, ensuring the model stays balanced through a dedicated checks sheet. ### Financial Statements and Supporting Outputs The model generates a full set of financial statements and supporting analyses. The income statement presents revenue by segment, gross profit, EBITDA, EBIT, net income, and dividends. - The balance sheet shows current and non-current assets, current and long-term liabilities, and equity. The cash flow statement provides cash from operations, investing, and financing, ending with the net change in cash. - A dedicated ratios sheet includes liquidity, solvency, profitability, efficiency, and growth metrics, along with free cash flow reconciliations. The debt schedule rolls forward term loan and revolver balances, calculates covenant compliance, and tracks PP&E and accumulated depreciation. A checks sheet performs fourteen integrity and covenant tests with pass or fail indicators, covering balance sheet balance, cash tie, retained earnings rollforward, depreciation tie, PP&E rollforward, term loan rollforward, opening balance sheet balance, scenario validity, and covenant thresholds. ### Practical Use and Scenario Analysis This template supports scenario analysis through a single toggle on the assumptions sheet, switching between base, bull, and bear cases. The toggle routes through a CHOOSE function to apply different growth rates, marketing percentages, capital expenditure percentages, and tax rates across the five-year forecast. - The cover sheet displays the active scenario, and the checks sheet validates that the toggle is set correctly. The model is designed for a single operating entity and produces a five-year annual projection. - All inputs are grouped on the assumptions sheet, and opening balance sheet balances are explicit inputs with a derived opening retained earnings figure that ensures the opening balance sheet balances. The public download is a values-only preview; the underlying model captures the relationships described here but does not include live formulas or automatic recalculation in the preview version. ## Built for operating forecasts Use this structure for fundraising, budgeting, strategic planning, and board-ready financial forecasting. ## Linked where it matters A good 3 statement model works because assumptions flow through properly across the whole workbook. ## Cleaner starting point Start from a proper model structure instead of repairing a generic spreadsheet download. ## The core operating model This page is for users who need an integrated operating model for planning, fundraising, or decision support. ## Better than disconnected tabs A 3 statement model works because every major assumption flows through the full forecast. ## Practical for founders and finance teams It is one of the most useful starting points for financial modelling work. ## Workbook structure ### Cover A simple front sheet for title, context, and navigation across the workbook. - Workbook title and model context - Clear entry point for the file - Simple navigation and orientation before diving into calculations ### Assumptions Core operating, cost, working capital, debt, tax, and opening balance sheet assumptions sit here so the rest of the model can update cleanly. - Revenue growth and operating drivers - Margin, cost, tax, and capex assumptions - Working capital drivers such as DSO, DIO, and DPO - Debt terms and opening balance sheet inputs ### Income Statement This sheet builds segmented revenue, COGS, operating expenses, EBITDA, depreciation, interest, tax, and net income. - Segmented revenue build - COGS and gross profit logic - Detailed operating expenses - EBITDA through to net income ### Balance Sheet The balance sheet links working capital, debt, PP&E, retained earnings, and cash so the model stays properly integrated. - Receivables, inventory, and payables - PP&E and accumulated depreciation - Debt balances and retained earnings - Balance check to keep the model coherent ### Cash Flow Statement The cash flow sheet ties the full model together through operating cash flow, investing activity, financing activity, and closing cash. - Indirect cash flow build - Working capital movements - Capex and financing activity - Opening to closing cash reconciliation ## Features - **Fully linked statements:** Every major line item flows through the model properly, so a change in revenue, margin, capex, or debt updates the entire forecast. - **Built for real operating plans:** Use it for budgeting, board planning, fundraising, and internal forecasting instead of relying on disconnected tabs. - **Excel-ready from the start:** Generate a clean workbook structure with assumptions, calculations, and outputs that your team can actually audit and extend. ## Use cases - **Fundraising and investor materials:** Prepare an integrated operating model that supports a deck, dataroom, or lender discussion. - **Budgeting and rolling forecasts:** Pressure-test hiring, margin, and working capital assumptions in one connected model. - **Strategic planning:** Model growth plans, capex needs, financing, and cash generation over multiple years. ## Frequently asked questions ### What is a 3 statement model? It is a financial model that links the income statement, balance sheet, and cash flow statement through shared assumptions and calculations. ### When should I use one? Use it when you need a linked operating forecast for planning, fundraising, or internal decision-making, beyond a simple revenue model or budget sheet. ### What should a 3 statement model include? A strong 3 statement model includes the income statement, balance sheet, and cash flow statement linked through operating assumptions, working capital mechanics, debt schedules, and balance checks. ### Is this useful for fundraising? Yes. A 3 statement model is often one of the most useful files for fundraising because it shows revenue growth, margins, cash flow, and financing needs together. ### Can I customise the workbook after download? Yes. The goal is to give you a cleaner Excel-ready starting point that can be adjusted for your own assumptions and reporting needs. ## Related templates - [DCF Model](https://finamodel.com/templates/dcf-model) - [Startup Cash Runway Model](https://finamodel.com/templates/runway-model) - [Cashflow Model](https://finamodel.com/templates/cashflow-model)