Download a three statement financial model template

A three-statement financial business model is a type of financial model used primarily in businesses looking to raise a round of investment or looking to forecast their company’s financial performance into the future. The model integrates three key financial statements: the income statement, the balance sheet, and the cash flow statement. Each of these statements is interconnected, and the model updates dynamically as inputs change.

Here’s a breakdown of the three statements included:

Income Statement: This statement provides a summary of the company’s revenues, expenses, and profits over a specific period. It starts with sales revenue and deducts various costs to arrive at the net income.
Balance Sheet: This statement provides a snapshot of a company’s assets, liabilities, and shareholders’ equity at a specific point in time. It shows what the company owns and owes, as well as the amount invested by the shareholders.
Cash Flow Statement: This statement shows how changes in the balance sheet and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.

These three financial statements are deeply interlinked:

The net income from the income statement is the starting point for the cash flow statement, showing the actual cash generated. The balance sheet balances out by applying the changes from the cash flow statement, which reflect new investments, debt changes, and movements in working capital. Forecasts or projections in one statement affect figures in the others. For instance, capital expenditures will impact the balance sheet (asset side) and the cash flow statement (cash outflow).

The three-statement model is crucial for making financial projections, conducting valuation, and assessing financial health. It helps in understanding the financial mechanics of a business under various scenarios and is frequently used to evaluate the impact of different strategic decisions before they are made.

Contract Sent is not a financial advisory firm, this template and subsequent pages on this website do not constitute or contain financial, investment or legal advice that is to be taken without consultation with your own financial, investment or legal advice. To understand whether or not templates and guidance on the Contract Sent website is applicable to your business, you should consult with a professional. The use and accessing of any resources contained within the Contract Sent site do not create an financial advisory relationship nor a attorney-client relationship between the user and Contract Sent.