Three-statement model

A spreadsheet in which the income statement, balance sheet and cash flow statement are linked so that a change in any assumption flows through all three and the balance sheet still balances.

Building one is the fastest way to understand how a business actually works, because the linkages force questions that reading never raises: what happens to working capital when revenue grows, how the depreciation schedule interacts with capital spending, where the funding for a shortfall comes from.

The balance check is the model's own test. A sheet that does not balance has an error, and finding it is where most of the learning happens.

If the model balances only because a plug was inserted, it does not balance.