What is the 3-Statement model?
The three-statement model is a comprehensive financial framework used in corporate finance and accounting, incorporating three fundamental financial statements: the income statement, the balance sheet, and the cash flow statement.
It integrates these statements to provide a holistic view of a company's financial performance, position, and cash flow dynamics over a specific period, aiding in analysis, forecasting, and strategic decision-making.
What Blocks does the 3-Statement model contain?
Income Statement - This report outlines a company's revenues, expenses, and profits over a specific period. It shows the net income or loss generated by the business operations.
Balance Sheet - This report presents the company's financial position at a specific point in time, detailing its assets, liabilities, and shareholders' equity. It provides a snapshot of what the company owns and owes.
Cash Flow Statement - This report tracks the cash inflows and outflows resulting from operating, investing, and financing activities. It helps assess the company's ability to generate cash and its liquidity.
Revenue - The total income a company generates from selling goods or services before deducting expenses, reflecting its primary source of income.
Workforce Cost - The expenses incurred by a company to compensate its employees, covering salaries, wages, benefits, and related expenses.
Operating Expense - Costs necessary to maintain regular business operations, including rent, utilities, marketing, and administrative expenses.
Capital Expenditures - Investments made by a company in long-term assets or infrastructure to improve or expand its operations.
Financing - The process of obtaining funds or capital for a business through various sources like loans, issuing stocks, or attracting investments to support company operations or expansion.
How will you use this model?
Modelling with Blox is easy with the following steps:
- Select your planning timescales
- Work through each block one by one, starting with the revenue block.
- View some of key analysis for each individual block through an interactive insights page, and adjust your inputs to see different scenarios
- View the summary blocks such as the Income Statement and Cash Flow to get the high level overview of the future performance of your business
- Save your model and share it with others!
When should you be modelling your business?
Financial modelling is an ongoing process - however there are some specific use cases for which having an up to date, robust model is essential:
1. Financial Planning - create budgets and set financial targets by projecting future financial performance based on various assumptions.
2. Investment Analysis - Investors and analysts use these models to evaluate the financial health and potential of a company before making investment decisions.
3. Strategic Decision-Making - assess the impact of strategic initiatives, such as mergers, acquisitions, expansions, or new product launches, on their financials.
4. Performance Evaluation - compare actual financial results against projected figures to identify variances and adjust future strategies accordingly.