About the 3-Statement Model
What is the 3-Statement Model?
A 3-statement model links the profit and loss account, the balance sheet and the cash flow statement. This simplified version takes revenue and cost ratios and flows them through to net income, operating cash flow and free cash flow.
Depreciation reduces profit but is not a cash cost, so it is added back to get operating cash flow; capital expenditure is then deducted for free cash flow.
How to use the 3-Statement Model
- Revenue (INR) (sample: 2,50,00,000)
- COGS Share (%) (sample: 48)
- Operating Expense Share (%) (sample: 18)
- Depreciation (INR) (sample: 9,00,000)
- Capex (INR) (sample: 18,00,000)
- Tax Rate (%) (sample: 25)
- Press Build 3-Statement Snapshot (results also refresh as you type). The result card shows the Free Cash Flow, along with Gross Profit, Net Income and Operating Cash Flow.
Formula used
Free cash flow = Net income + Depreciation − Capex
- Gross profit = revenue × (1 − COGS %)
- Net income = (gross profit − opex − depreciation) × (1 − tax rate)
A full model would also include interest and changes in working capital.
Worked example
These are the sample values already filled in the calculator above, and the result it returns for them:
| Input | Sample value |
|---|---|
| Revenue (INR) | 2,50,00,000 |
| COGS Share (%) | 48 |
| Operating Expense Share (%) | 18 |
| Depreciation (INR) | 9,00,000 |
| Capex (INR) | 18,00,000 |
| Tax Rate (%) | 25 |
| Result | Value |
|---|---|
| Free Cash Flow | ₹48,00,000 |
| Gross Profit | ₹1,30,00,000 |
| Net Income | ₹57,00,000 |
| Operating Cash Flow | ₹66,00,000 |
Tips for using the 3-Statement Model
- Growing businesses usually tie up cash in receivables and inventory, reducing real free cash flow.
- Check that capex is enough to maintain assets; capex well below depreciation cannot last.