Three Statement Financial Excel Model
Originally published: 26/12/2017 10:20
Last version published: 16/01/2019 08:53
Publication number: ELQ-48792-6
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Three Statement Financial Excel Model

Fully-linked three statement financial model with assumptions in a single tab

A three statement financial model connects the income statement, balance sheet, and cash flow statement into one dynamically linked model.

This model has an assumptions and drivers section which is used to build the forecast in the three financial statements. The model is built in a single tab (worksheet) format.

Why should financial analysts or anyone working in the finance industry learn about the three statement models?

Three statement models are the foundation on which more advanced financial models are built such as discounted cash flow DCF models, mergers models, leveraged buyout LBO models, and various other types of financial models.

Advantages of a single worksheet model are:

- Easier to navigate (don’t have to switch between tabs)
- Less risk of mislinking formulas (all time periods are in the same column)
- More organized with the use of grouping cells
- Allows more room for consolidating multi-business companies

There are several steps required to build a three statement model, including:

1. Input the historical financial information into Excel
2. Determine the assumptions that will drive the forecast
3. Forecast the income statement
4. Forecast capital assets
5. Forecast financing activity
6. Forecast the balance sheet
7. Complete the cash flow statement

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Further information

Use assumptions and drivers to build a five year forecast and three statement model

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