What is a 3 statement model?
A 3 statement model links the income statement, balance sheet, and cash flow statement into one dynamically connected financial model. 3 statement models are the foundation on which more advanced financial models are built such as discounted cash flow DCF models, merger models, leveraged buyout LBO models, and various other types of financial models.
Levels of modeling
Layout and Structure
There are two common approaches to structuring a 3 statement model: single worksheet and multip worksheet. While both approaches are fine, CFI strongly recommends using a single worksheet structure (with grouping) for several reasons outlined below.
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
Single versus multi worksheet models