3 Statement Model Template Excel & Google Sheets

What is The 3 Statement Model Template?

The 3-statement financial model is a dynamic financial model that integrates a company’s income statement, balance sheet, and cash flow statement. These statements collectively offer a complete view of a company’s revenue, expenses, profitability, assets, liabilities, equity, and cash flow over time.

The model allows you to input historical financial data and project future performance over a defined period, typically five years. It is a fundamental tool in financial analysis, valuation, transaction modeling, and strategic decision-making. By linking these three statements, you can assess whether your company’s projected financial metrics—such as revenue growth, margins, debt repayment, and free cash flow—are realistic.

The model also enables scenario analysis, helping businesses and investors evaluate financial stability under various market conditions. Given its importance, mastering the 3-statement model is a critical skill for professionals in investment banking, private equity, corporate finance, and financial planning & analysis (FP&A).

Importance of 3 Statement Model Template

Gives a Comprehensive Financial Overview:

A well-structured 3-statement model provides a complete financial picture by connecting key financial statements. This integration ensures that every financial activity is accounted for and helps stakeholders understand the interdependencies between revenue, expenses, assets, liabilities, and cash flow. It also aligns with generally accepted accounting principles (GAAP), ensuring consistency and reliability in financial reporting.

Enhances Decision-Making:

Decision-makers leverage the 3-statement model to analyze historical performance and forecast future outcomes. By adjusting key assumptions—such as revenue growth, cost structure, or capital expenditures—executives can evaluate potential investment opportunities, financing options, and operational strategies with greater confidence.

Improves Forecasting Accuracy:

The 3-statement model enables more precise cash flow forecasting by linking operational assumptions to financial outcomes. This helps companies plan for capital expenditures, manage liquidity, and anticipate financing needs. It also allows analysts to test different scenarios and adjust projections in response to economic changes.

Serve as a Foundation for Advanced Financial Modeling:

The 3-statement model serves as the core framework for more sophisticated financial models, such as discounted cash flow (DCF) analysis, leveraged buyout (LBO) models, and merger & acquisition (M&A) models. These advanced models build upon the fundamental structure of the 3-statement model to evaluate business valuation, investment feasibility, and financial structuring.

Helps in Risk Identification and Mitigation:

By linking financial statements, the model highlights potential risks, such as liquidity constraints, unsustainable debt levels, or declining profitability. Early detection of financial red flags enables businesses to take corrective actions before issues escalate.

Who Can Use The 3 Statement Model Template?

Business Owners & Executives:

Enables strategic planning, budgeting, and financial forecasting to guide business growth and investment decisions. It helps CEOs assess profitability, manage financial risks, and make informed decisions regarding expansion, cost control, and capital allocation. The model also serves as a vital tool for tracking performance against financial goals and ensuring alignment with long-term business strategies.

Investors & Analysts:

Assists in evaluating company financials, forecasting performance, and assessing investment opportunities based on projected financial health. Investors use the model to determine the viability of an investment by analyzing trends in revenue, expenses, and profitability, while analysts rely on it to generate insights that drive investment recommendations and portfolio management strategies.

Financial Planning & Analysis (FP&A) Professionals:

Supports corporate finance teams in scenario analysis, cost management, and strategic financial planning. FP&A professionals leverage the model to build financial forecasts, assess the impact of different business scenarios, and provide data-driven recommendations to executive leadership for operational improvements and long-term growth.

Investment Bankers & Private Equity Professionals:

Essential for conducting valuations, structuring deals, and analyzing potential mergers and acquisitions. Investment bankers use the model to prepare pitchbooks, evaluate acquisition targets, and structure financial transactions, while private equity professionals rely on it to assess leveraged buyouts, optimize capital structures, and maximize investor returns.

Lenders & Credit Analysts:

Helps assess a company’s creditworthiness by analyzing financial projections and debt repayment capabilities. Lenders use the model to evaluate risk exposure before issuing loans, ensuring borrowers have the financial stability to meet debt obligations. Credit analysts rely on it to determine credit ratings, structure loan terms, and mitigate potential defaults.

What Does The 3-Statement Model Template Contain?

1- Income Statement:

1. Revenue Streams: Tracks different sources of income, ensuring clear visibility into total revenue generation.
2. Sales Returns: Captures any deductions due to product returns, maintaining an accurate net revenue calculation.
3. Cost of Goods Sold (COGS): Differentiates between fixed and variable costs to assess gross profit margins.
4. Expenses: Includes general and administrative costs, employee-related expenses, and miscellaneous expenditures.
5. Net Income Calculation: Determines profitability after accounting for all revenue and expenses.

Find here: Free Income Statement Template

2- Balance Sheet:

1. Assets: Lists current and long-term assets, such as cash, accounts receivable, and property.
2. Liabilities: Includes both short-term obligations (e.g., accounts payable) and long-term debt.
3. Equity: Shows owner’s equity and retained earnings to maintain the balance between assets and liabilities.

Find here: Free Balance Sheet Template
 

3- Cash Flow Statement:

1. Operating Activities: Tracks cash inflows and outflows related to daily business operations.
2. Investing Activities: Records cash used for purchasing assets or generated from asset sales.
3. Financing Activities: Captures cash movements related to debt and equity financing.

Find here: Free Cash Flow Statement Template

How to Use 3 Statement Model Template

1- Input Financial Data

• Gather revenue figures, expense reports, and asset/liability data.
• Enter values in their respective categories within the Income Statement, Balance Sheet, and Cash Flow Statement.

2- Customize Business Assumptions

• Adjust revenue growth rates, cost projections, and expense estimates to align with business objectives.
• Modify capital expenditure and debt financing assumptions to reflect planned investments.

3- Ensure Data Consistency

• Cross-check figures across all three statements to confirm accuracy.
• Validate that total assets equal total liabilities plus equity.

4- Analyze Financial Performance

• Use ratios like gross margin, operating margin, and net profit margin to assess profitability.
• Review cash flow trends to ensure sufficient liquidity for operations.

5- Forecast Future Scenarios

• Modify inputs to test different financial scenarios (e.g., revenue growth, cost inflation, or investment impact).
• Utilize the model to prepare for financial planning and strategic decision-making.

6- Review and Update Regularly

• Maintain updated records by periodically refreshing data inputs.
• Integrate with accounting tools for seamless tracking and reporting.