About this lesson
Link the three financial statements together and explain how it flows through.
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Three Way Integrated
Understand the links between the Financial Statements.
When to use
It is necessary to understand the links between the Financial Statements when building a Financial Model.
- Two links between the three financial statements
- The net profit after tax in the income statement, has to link to the actual opening retained profits or net profit after tax in the equity section of the balance sheet.
- Similarly, the actual net increase or decrease in cash held from the cash flow statement has to link through to its counterpart in the balance sheet in the income and taxes section.
- All other links sourced from calculations
- Conceptual order: Income Statement (smallest) --> Cash Flow Statement (middle) --> Balance Sheet (largest).
- As long as the Net Profit After Tax links into the Retained Earnings section of the Balance Sheet and the Net Increase / Decrease in Cash Held from the Cash Flow Statement links into the Current Assets section of the Balance Sheet, you have all of the links you require to put a financial model together.
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