Integrated three-statement model
The operating model everything else sits on. Build a forecast in which the balance sheet balances because the cash flow statement is complete, and explain why.
Built in: Investment banking, Private equity, Equity research and hedge funds, Every seat
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: integrated three-statement model.Updated 30 September 2026
Who builds it, and for whatAnalysts in banking, private equity, research and credit build one early and return to it often. It is the operating base under a DCF, the source of the cash flow an LBO sweeps, and how a credit analyst tests whether a borrower can service its debt. It turns a set of operating assumptions into three statements that reconcile.
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| A | B | C | D | E | F | G | H | I | J | K | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Assumptions | ||||||||||
| 2 | Forecast drivers, FY4E to FY8E. Historical figures are inputs on the statement sheets. | ||||||||||
| 4 | Driver | Unit | FY1A | FY2A | FY3A | FY4E | FY5E | FY6E | FY7E | FY8E | |
| 5 | Scenario | ||||||||||
| 6 | Scenario | # | 1 | 1 = base, 2 = upside, 3 = downside. Sets revenue growth and gross margin. | |||||||
| 8 | Revenue growth by scenario | ||||||||||
| 9 | Revenue growth, base case | % | 8.0% | 7.0% | 6.0% | 5.0% | 5.0% | ||||
| 10 | Revenue growth, upside case | % | 11.0% | 10.0% | 9.0% | 8.0% | 7.0% | ||||
| 11 | Revenue growth, downside case | % | 2.0% | 1.0% | 0.0% | 2.0% | 3.0% | ||||
| 12 | Revenue growth, selected scenario | % | 8.0% | 7.0% | 6.0% | 5.0% | 5.0% | ||||
| 14 | Margins and costs | ||||||||||
| 15 | Gross margin, base case | % | 42.0% | 42.0% | 43.0% | 43.0% | 43.0% | ||||
| 16 | Gross margin, upside case | % | 43.0% | 44.0% | 45.0% | 45.0% | 45.0% | ||||
| 17 | Gross margin, downside case | % | 40.0% | 39.0% | 39.0% | 39.0% | 39.0% | ||||
| 18 | Gross margin, selected scenario | % | 42.0% | 42.0% | 43.0% | 43.0% | 43.0% | ||||
| 19 | Operating expenses, % of revenue | % | 25.0% | ||||||||
| 20 | Tax rate | % | 25.0% | ||||||||
| 22 | Working capital | ||||||||||
| 23 | Days sales outstanding (DSO) | days | 45 | ||||||||
| 24 | Days inventory outstanding (DIO) | days | 60 | ||||||||
| 25 | Days payables outstanding (DPO) | days | 40 | ||||||||
| 26 | Days in the year | days | 365 | ||||||||
| 28 | Fixed assets | ||||||||||
| 29 | Capital expenditure, % of revenue | % | 5.0% | ||||||||
| 30 | Depreciation, % of opening net PP&E | % | 12.0% | ||||||||
| 32 | Financing | ||||||||||
| 33 | Minimum cash balance | $m | 20.0 | ||||||||
| 34 | Term loan scheduled amortisation | $m | 15.0 | 15.0 | 15.0 | 15.0 | 15.0 | ||||
| 35 | Term loan interest rate | % | 6.0% | ||||||||
| 36 | Revolver interest rate | % | 7.0% | ||||||||
| 37 | Interest rate on cash | % | 2.0% | ||||||||
| 39 | Distributions | ||||||||||
| 40 | Dividend payout, % of net income | % | 30.0% | ||||||||
Select a cell to see its row, its schedule and the type of cell. Font colours: blue for inputs, black for formulas, green for links to other sheets. Scroll sideways to see every period.
Download
Integrated three-statement model: the workbook
Excel workbook with working formulas, no macros and no external links. Work with it above first; it is the same model as the preview.
Have your build graded
Build the starter, save it, and upload it here. It is marked the way a reviewer would mark the integrated three-statement model, on five things:
- Correct outputsyour figures against the model’s, line by line, and the headline outputs
- Correct linkageseach formula checked against the cells it reads, so a mistake counts once, where it starts
- Built with formulasno hardcoded numbers where a formula belongs
- Holds when assumptions changeyour workbook recalculated with assumptions changed, and every line checked again
- Workbook integritythe checks close, the status reads OK, and the rest of the model is as given
Checking your account…
What the base case says
- Revenue, FY8E
- $634.7m
- EBITDA margin, FY8E
- 18.0%
- Closing cash, FY8E
- $99.9m
- Net debt / EBITDA, FY8E
- -0.7x
- Cash conversion cycle, FY8E
- 65
Read from the workbook as served, every input at its default. Periods: FY1A, FY2A, FY3A, FY4E, FY5E, FY6E, FY7E, FY8E. The figures are invented and move with whatever you type in.
What this model is
An operating model for one company with three historical years (FY1A to FY3A) and five forecast years (FY4E to FY8E). The income statement, balance sheet and cash flow statement are linked through working capital, PP&E, debt and equity schedules.
Historical figures are inputs on the statement and schedule sheets. Forecast drivers are on the Assumptions sheet, and every forecast line on the statements is a formula.
Uses: learning how the statements connect, testing the effect of a scenario on cash and leverage, or providing the operating base for a valuation.
Seats: Investment banking, Private equity, Equity research and hedge funds, Every seat.
How the schedules connect
Every row in the workbook is tagged with the schedule it belongs to; the inspector above shows the tag when you click a row. These are the schedules this model is made of and where each one lives.
Revenue build
Where the top line comes from
Assumptions, rows 9–12 · Income Statement, rows 6–10
Operating costs and margins
Cost of sales, opex, EBITDA
Assumptions, rows 15–20 · Income Statement, rows 13–17
Working capital schedule
Receivables, inventory and payables in days
Assumptions, rows 23–26 · Working Capital, rows 6–10
Capex and depreciation (PP&E roll-forward)
Opening, plus capex, less depreciation, closing
Assumptions, rows 29–30 · Cash Flow, rows 12–13 · PP&E, rows 6–11
Debt schedule
Tranches, interest, amortisation and the sweep
Assumptions, rows 33–37 · Income Statement, rows 20–25 · Cash Flow, rows 16–20 · Debt, rows 6–9 · Debt, rows 12–15 · Debt, rows 18–21 · Debt, rows 24–29
Equity roll-forward
Share capital and retained earnings
Assumptions, row 40 · Income Statement, rows 28–29 · Equity, rows 6–12
Cash flow statement
Indirect method, closing on balance-sheet cash
Cash Flow, rows 6–9 · Cash Flow, rows 23–25
Balance sheet
Every line from a schedule, and the check
Balance Sheet, rows 6–10 · Balance Sheet, rows 13–16 · Balance Sheet, rows 19–24
What you should be able to explain
- How net income reaches the balance sheet through retained earnings, and cash through the cash flow statement.
- Why an increase in working capital is a use of cash, and why receivables follow revenue while payables follow cost of sales.
- How a PP&E roll-forward turns capex and depreciation into a balance.
- What a revolver does in a model, and why charging interest on opening balances avoids a circular reference.
- What a balance check proves, and what it does not.
What a reviewer looks for
- Plugging cash to make the balance sheet balance instead of finding the line that is missing.
- Forecasting depreciation as a percentage of revenue while capex is a percentage of revenue too, so the asset base drifts.
- Charging interest on average balances without an iteration switch and wondering why the workbook warns of a circularity.
- Entering a hardcoded number in a forecast cell to fix one year, which breaks every year after it.
Conventions this workbook uses
Stated on the cover sheet too. A model is only as trustworthy as the decisions it tells you it made.
- Costs are shown as positive numbers and subtracted, so margins need no sign change.
- Interest uses opening debt and cash balances. This avoids a circular reference between interest and cash; a draw or repayment during the year affects interest from the following year.
- The revolver funds any shortfall below minimum cash and is repaid from cash above the minimum. Cash is not used as a balancing figure.
- Depreciation is a single rate applied to opening net PP&E. Depreciation by asset vintage is not modelled.
- Working capital is driven by days outstanding: receivables on revenue, inventory and payables on cost of goods sold, over a 365-day year.
Build it yourself
The starter workbook
The Debt sheet has been cleared from the cash available block to the totals. Build the term loan, the revolver and the interest lines so that the three statements reconcile again. The Checks sheet shows when they do.
Blanks: Debt schedule. Free with any account. Compare with the worked model when you are done: download above.
The path around this model
Understand it, drill it, read the build, then apply it to a real company.
Understand · Primer
Three-Statement Modelling
Intro · a curated reel with a quiz
Build · Lab · ~8 min
Three-Statement Linker
Walk any event through all three statements in the right order, with the right signs, and prove the balance sheet balances rather than asserting it.
Build · Lab · ~10 min
Depreciation Waterfall
Forecast depreciation from a capex plan rather than a ratio, read a capex-to-depreciation multiple, and say which part of the spend is buying growth and which is only standing still.
Read · Guide · 13 min
How to Build a Three-Statement Model That Actually Balances
Read · Guide · 11 min
Financial Modelling Best Practices: The Conventions That Make a Model Auditable
Read · Guide · 7 min
"Walk Me Through the Three Statements" — And Every Follow-Up
Read · Guide · 11 min
How to Review a Financial Model Before It Leaves Your Desk
Read · Guide · 10 min
Scenario and Sensitivity Architecture: Building a Model That Can Be Stress-Tested
Apply · Skill
Model Audit
Find the errors in a financial model before someone senior does.
Vocabulary: The Three Financial Statements, Working Capital, EBITDA, Net Debt.
Questions about this model
Why does the balance sheet balance?
Because every movement in every balance passes through the cash flow statement or retained earnings. Cash is the closing figure of the cash flow statement, not a balancing item. If a line were missing from the cash flow statement the check would fail, which is why the check exists.
Why is interest charged on opening balances rather than average?
Average-balance interest depends on the closing balance, which depends on cash, which depends on interest. That is a genuine circular reference and needs an iteration switch and a circuit breaker to be safe. Opening-balance interest accepts a one-year lag in exchange for a model that calculates without iteration, a reasonable trade for a learning model and a common choice in practice.
How do I add another year?
Copy the last forecast column on every sheet and extend the driver rows on the Assumptions sheet. Every forecast formula references its own column and the one before it, so nothing else changes. Then re-open the Checks sheet.
Is the history real?
No. The model uses illustrative data for a fictional company. The three historical years are internally consistent: the cash flow derived for FY2A and FY3A reconciles to the historical cash balance, which you can verify on the Checks sheet.
What does it cost?
Nothing to preview: the whole workbook is on this page, and a free account works with it online, every formula included. Every starter workbook downloads with a free account. L3VLUP Plus ($4.99/month) keeps one worked model each billing month, yours for good, and L3VLUP Pro ($25/month) keeps every one.