It is critical that a complex financial model like the 3-statement model adheres to a consistent set of best practices. “let’s borrow a bit more”) all interact to impact the bottom line in the future.Ī well-built 3-statement financial model helps insiders ( corporate development professionals, FP&A professionals) and outsiders ( institutional investors, sell side equity research, investment bankers and private equity) see how the various activities of a firm work together, making it easier to see how decisions impact the overall performance of a business. “let’s buy an additional machine”) and financing decisions (i.e. “let’s reduce prices”), investing decisions (i.e. While accounting enables us to understand a company’s historical financial statements, forecasting those financial statements enables us to explore how a company will perform under a variety of different assumptions and visualize how a company’s operating decisions (i.e. M&A, DCF and LBO models depend on forecasts produced in the 3-statement modelĪn integrated 3-statement financial model is a type of model that forecasts a company’s income statement, balance sheet and cash flow statement.Effective modeling requires a combination of skills.Calculating shares and earnings per share (EPS).Gathering data ahead of financial modeling.
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