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Three-Statement Financial Model

L3Business analysisFinancequantitativeStages 1 to 5

Reference model

The three linked financial statementsThree panels: the income statement, from revenue down to net profit; the balance sheet, assets against liabilities and equity; and the cash-flow statement, from net profit through working capital, investing and financing to closing cash. Arrows show net profit flowing into the cash-flow statement and into equity, and closing cash flowing into the balance sheet. Below, a row of years — base year, Year 1, Year 2 and Year 3 — shows each year opening where the last closed, and a note that assets always equal liabilities plus equity.Income statementRevenue− Cost of goods sold= Gross profit− Operating expenses= EBITDA− Depreciation− Interest− Tax= Net profitBalance sheetCash and bankReceivablesInventoryNet fixed assets= Total assetsPayablesBorrowingsEquity= Liabilities and equityCash-flow statementNet profit+ Depreciation− Working capital tied up= Cash from operations− Capital spending+ Borrowings − dividends= Net change in cash+ Opening cash= Closing cashNet profitRetained profit grows equityClosing cash = balance-sheet cashBase yearYear 1Year 2Year 3Assets always equal liabilities plus equityIf the balance sheet does not balance, a link between the statements is broken. Each year opens where the last one closed.

Profit flows into equity and into cash from operations; the cash-flow statement ends in the balance sheet’s cash.

About this model

Turns the business model into a projection of the three statements that every lender and investor reads: the income statement (profit), the balance sheet (what the business owns and owes) and the cash-flow statement (where the cash went). They are linked: profit feeds equity, the cash-flow statement ends in the balance sheet’s cash, and the balance sheet must always balance.

Standard integrated financial modelling (income statement, balance sheet and cash-flow statement linked through net profit, working capital and cash) · Standard practice

How to read it

  • Start from the last completed year: its profit and loss, and its balance sheet. Equity is the balancing figure.
  • Give the growth and the ratios for each of the next three years. Anything you leave blank carries forward from the year before.
  • Check the three statements tie together: the balance check is zero in every year, and the cash balance never goes negative — if it does, that is the funding you will need.

What this does

Turns the business model into a full P&L, Balance Sheet, and Cash Flow projection.

When to use it

Whenever the model changes materially, and at minimum once a year for planning.

What happens next

Outputs feed the Balanced Scorecard's Financial perspective and the Investment Prioritization Matrix.

Golden thread

Builds on ←

  • bmc
  • bcg
  • mvfm
  • pivotpersist

Feeds into →

  • bsc

Framework library: Financial (layer L3), lifecycle stages 1 to 5.

Use this tool, free

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Hand-built by Eccellere and reviewed by Eccellere on 02/11/2026. Guidance, not advice: apply your own judgement.