The P&L, Balance sheet, and Cash flow statements are three interrelated parts. The P&L feeds net income on the liabilities and equity side of the Balance sheet. At the same time, we obtain Cash (an asset) by summing the bottom-line result of the Cash flow statement with previous year cash. If the three statements don’t ‘talk’ to each other, it means that a mistake has been made.
The relationship between P&L, Balance sheet, and Cash flow allows us to build financial models that rely on 3-statement modelling in which the Balance sheet is balanced and ending cash equals beginning cash plus net cash flow.
Some other related topics you might be interested to explore are Profit & Loss, Balance Sheet, and Cash Flow.
This is an open-access Excel template in XLSX format that will be useful for anyone who wants to work as a Financial Analyst, Business Analyst, Consultant, Corporate Executive, or everyone preparing a corporate presentation.
You can now download the Excel template for free.
3-Statement Model is among the topics included in the Corporate Finance module of the CFA Level 1 Curriculum.
