3 Statement Model

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 Course : Financial
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Modelling
Lecture On : 3 Statement
Modelling
Instructor : Veena Sharma

23/05/19 2
Today’s Agenda
1. Introduction
2. Concepts
3. Preparation of the 3 statement model and the supporting schedules

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3 Statement Model

A 3-statement financial model is a type of model that predicts and estimates a company’s income
statement, balance sheet and cash flow statement for future specified no. of years

These statements are linked and integrated to each other and all the other supporting schedules like the
working capital schedule, Fixed asset schedule and the Debt Schedule.

Colour codes usually used are as follows;

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There are various periodicities of the 3 statement model namely;
• Annual
• Biannual
• Quarterly
• Half Yearly

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 Contd….
3 Statement models can be prepared on single sheet with different statements and schedules grouped
separately or on different spreadsheets with data linked to one another.

How do you build a 3 statement model?

1. Input 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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Chronology of Statements

The schedules and the statements need to be prepared in the following sequence;

1. Prepare the supporting Schedules like Working Capital Schedule, Fixed asset schedule and the Debt Schedule from

which the data on Assets, Liabilities, Depreciation, Long term debt, Interest and debt repayment are sourced into the

three important statements.

2. Link the values in Income statement to the supporting schedules

3. Link the values in Cash Flow Statement to the supporting schedules

4. Finally link the Balance sheet with the supporting schedules, Income statement and Cash Flow Statement

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Thank You!

2/08/121