3-statement-model

Research Workspace Adapter

In this research workspace, prefer source-tracked company-topic inputs before external, web, or manual data:

• _cache/financial-data/financial-data-summary.md for human/LLM review
• _cache/financial-data/internal/actuals-resolved.json for machine historical actuals
• _cache/financial-data/internal/evidence-pack.json for completeness/source-map/cross-check
• _cache/driver-map/driver-map.md for human/LLM driver treatment
• _cache/driver-map/internal/driver-map.json for machine driver inputs

Do not turn missing or unmapped actuals into zero. Leave them blank, flag the mapping gap, and keep source/confidence status visible in the model checks.

Model Sub-Agent Protocol

This skill may spawn / delegate sub-agents for bounded model QA, but sub-agents must return only model QA notes / work-packet findings. The main agent owns the final workbook, formula architecture, model treatment, valuation handoff, and delivery decision.

Runtime cap: no per-skill sub-agent count limit; max 6-8 active sub-agents globally; parallel within one skill but serial across skills; close sub-agents immediately after evidence cards or QA notes return.

Useful 3-statement sub-agent QA buckets:

• actuals mapping audit against actuals-resolved.json, evidence-pack.json, source-map, and completeness
• IS / BS / CF linkage check and balance check
• missing or unmapped actuals review; never coerce missing or unmapped actuals to zero

3-Statement Financial Model Template Completion

Complete and populate integrated financial model templates with proper linkages between Income Statement, Balance Sheet, and Cash Flow Statement.

⚠️ CRITICAL PRINCIPLES — Read Before Populating Any Template

Environment — Office JS vs Python:

• If running inside Excel (Office Add-in / Office JS): Use Office JS directly. Write formulas via range.formulas = [["=D14*(1+Assumptions!$B$5)"]] — never range.values for derived cells. No separate recalc; Excel computes natively. Use context.workbook.worksheets.getItem(...) to navigate tabs.
• If generating a standalone .xlsx file: Use Python/openpyxl. Write ws["D15"] = "=D14*(1+Assumptions!$B$5)", then run recalc.py before delivery.
• Office JS merged cell pitfall: Do NOT call .merge() then set .values on the merged range — throws InvalidArgument because the range still reports its pre-merge dimensions. Instead write value to top-left cell alone, then merge + format the full range: ws.getRange("A1").values = [["INCOME STATEMENT"]]; const h = ws.getRange("A1:G1"); h.merge(); h.format.fill.color = "#1F4E79";
• All principles below apply identically in either environment.

Formulas over hardcodes (non-negotiable):

• Every projection cell, roll-forward, linkage, and subtotal MUST be an Excel formula — never a pre-computed value
• When using Python/openpyxl: write formula strings (ws["D15"] = "=D14*(1+Assumptions!$B$5)"), NOT computed results (ws["D15"] = 12500)
• The ONLY cells that should contain hardcoded numbers are: (1) historical actuals, (2) assumption drivers in the Assumptions tab
• If you find yourself computing a value in Python and writing the result to a cell — STOP. Write the formula instead.
• Why: the model must flex when scenarios toggle or assumptions change. Hardcodes break every downstream integrity check silently.

Verify step-by-step with the user:

1. After mapping the template → show the user which tabs/sections you've identified and confirm before touching any cells
2. After populating historicals → show the user the historical block and confirm values/periods match source data
3. After building IS projections → run the subtotal checks, show the user the projected IS, confirm before moving to BS
4. After building BS → show the user the balance check (Assets = L+E) for every period, confirm before moving to CF
5. After building CF → show the user the cash tie-out (CF ending cash = BS cash), confirm before finalizing
6. Do NOT populate the entire model end-to-end and present it complete — break at each statement, show the work, catch errors early

Formatting — Professional Blue/Grey Palette (Default unless template/user specifies otherwise)

Keep colors minimal. Use only blues and greys for cell fills. Do NOT introduce greens, yellows, oranges, or multiple accent colors — a clean model uses restraint.

Element	Fill	Font
Section headers (IS / BS / CF titles)	Dark blue #1F4E79	White bold
Column headers (FY2024A, FY2025E, etc.)	Light blue #D9E1F2	Black bold
Input cells (historicals, assumption drivers)	Light grey #F2F2F2 or white	Blue #0000FF
Formula cells	White	Black
Cross-tab links	White	Green #008000
Check rows / key totals	Medium blue #BDD7EE	Black bold

That's 3 blues + 1 grey + white. If the template has its own color scheme, follow the template instead.

Font color signals what a cell is (input/formula/link). Fill color signals where you are (header/data/check).

Model Structure

Identifying Template Tab Organization

Templates vary in their tab naming conventions and organization. Before populating, review all tabs to understand the template's structure. Below are common tab names and their typical contents:

Common Tab Names	Contents to Look For
IS, P&L, Income Statement	Income Statement
BS, Balance Sheet	Balance Sheet
CF, CFS, Cash Flow	Cash Flow Statement
WC, Working Capital	Working Capital Schedule
DA, D&A, Depreciation, PP&E	Depreciation & Amortization Schedule
Debt, Debt Schedule	Debt Schedule
NOL, Tax, DTA	Net Operating Loss Schedule
Assumptions, Inputs, Drivers	Driver assumptions and inputs
Checks, Audit, Validation	Error-checking dashboard

Template Review Checklist

• Identify which tabs exist in the template (not all templates include every schedule)
• Note any template-specific tabs not listed above
• Understand tab dependencies (e.g., which schedules feed into the main statements)
• Locate input cells vs. formula cells on each tab

Understanding Template Structure

Before populating a template, familiarize yourself with its existing layout to ensure data is entered in the correct locations and formulas remain intact.

Identifying Row Structure

• Locate the model title at top of each tab
• Identify section headers and their visual separation
• Find the units row indicating $ millions, %, x, etc.
• Note column headers distinguishing Actuals vs. Estimates periods
• Confirm period labels (e.g., FY2024A, FY2025E)
• Identify input cells vs. formula cells (typically distinguished by font color)

Identifying Column Structure

• Confirm line item labels in leftmost column
• Verify historical years precede projection years
• Note the visual border separating historical from projected periods
• Check for consistent column order across all tabs

Working with Named Ranges Templates often use named ranges for key inputs and outputs. Before entering data:

• Review existing named ranges in the template (Formulas → Name Manager in Excel)
• Common named ranges include: Revenue growth rates, cost percentages, key outputs (Net Income, EBITDA, Total Debt, Cash), scenario selector cell
• Ensure inputs are entered in cells that feed into these named ranges

Projection Period

• Templates typically project 5 years forward from last historical year
• Verify historical (A) vs. projected (E) columns are clearly separated
• Confirm columns use fiscal year notation (e.g., FY2024A, FY2025E)

Margin Analysis

Note: The following margin analysis should only be performed if prompted by the user or if the template explicitly requires it. If no prompt is given, skip this section.

Calculate and display profitability margins on the Income Statement (IS) tab to track operational efficiency and enable peer comparison.

Core Margins to Include

Margin	Formula	What It Measures
Gross Margin	Gross Profit / Revenue	Pricing power, production efficiency
EBITDA Margin	EBITDA / Revenue	Core operating profitability
EBIT Margin	EBIT / Revenue	Operating profitability after D&A
Net Income Margin	Net Income / Revenue	Bottom-line profitability

Income Statement Layout with Margins

Display margin percentages directly below each profit line item:

• Gross Margin % below Gross Profit
• EBIT Margin % below EBIT
• EBITDA Margin % below EBITDA
• Net Income Margin % below Net Income

Credit Metrics

Note: The following Credit analysis should only be performed if prompted by the user or if the template explicitly requires it. If no prompt is given, skip this section.

Calculate and display credit/leverage metrics on the Balance Sheet (BS) tab to assess financial health, debt capacity, and covenant compliance.

Core Credit Metrics to Include

Metric	Formula	What It Measures
Total Debt / EBITDA	Total Debt / LTM EBITDA	Leverage multiple
Net Debt / EBITDA	(Total Debt - Cash) / LTM EBITDA	Leverage net of cash
Interest Coverage	EBITDA / Interest Expense	Ability to service debt
Debt / Total Cap	Total Debt / (Total Debt + Equity)	Capital structure
Debt / Equity	Total Debt / Total Equity	Financial leverage
Current Ratio	Current Assets / Current Liabilities	Short-term liquidity
Quick Ratio	(Current Assets - Inventory) / Current Liabilities	Immediate liquidity

Credit Metric Hierarchy Checks

Validate that Upside shows strongest credit profile:

• Leverage: Upside < Base < Downside (lower is better)
• Coverage: Upside > Base > Downside (higher is better)
• Liquidity: Upside > Base > Downside (higher is better)

Covenant Compliance Tracking

If debt covenants are known, add explicit compliance checks comparing actual metrics to covenant thresholds.

Scenario Analysis (Base / Upside / Downside)

Use a scenario toggle (dropdown) in the Assumptions tab with CHOOSE or INDEX/MATCH formulas.

Scenario	Description
Base Case	Management guidance or consensus estimates
Upside Case	Above-guidance growth, margin expansion
Downside Case	Below-trend growth, margin compression

Key Drivers to Sensitize: Revenue growth, Gross margin, SG&A %, DSO/DIO/DPO, CapEx %, Interest rate, Tax rate.

Scenario Audit Checks: Toggle switches all statements, BS balances in all scenarios, Cash ties out, Hierarchy holds (Upside > Base > Downside for NI, EBITDA, FCF, margins).

SEC Filings Data Extraction

If the template specifically requires pulling data from SEC filings (10-K, 10-Q), see references/sec-filings.md for detailed extraction guidance. This reference is only needed when populating templates with public company data from regulatory filings.

Completing Model Templates

This section provides general guidance for completing any 3-statement financial model template while preserving existing formulas and ensuring data integrity.

Step 1: Analyze the Template Structure

Before entering any data, thoroughly review the template to understand its architecture:

Identify Input vs. Formula Cells

• Look for visual cues (font color, cell shading) that distinguish input cells from formula cells
• Common conventions: Blue font = inputs, Black font = formulas, Green font = links to other sheets
• Use Excel's Trace Precedents/Dependents (Formulas → Trace Precedents) to understand cell relationships
• Check for named ranges that may control key inputs (Formulas → Name Manager)

Map the Template's Flow

• Identify which tabs feed into others (e.g., Assumptions → IS → BS → CF)
• Note any supporting schedules and their linkages to main statements
• Document the template's specific line items and structure before populating

Step 2: Filling in Data Without Breaking Formulas

Golden Rules for Data Entry

Rule	Description
Only edit input cells	Never overwrite cells containing formulas unless intentionally replacing the formula
Preserve cell references	When copying data, use Paste Values (Ctrl+Shift+V) to avoid overwriting formulas with source formatting
Match the template's units	Verify if template uses thousands, millions, or actual values before entering data
Respect sign conventions	Follow the template's existing sign convention (e.g., expenses as positive or negative)
Check for circular references	If the template uses iterative calculations, ensure Enable Iterative Calculation is turned on

Safe Data Entry Process

1. Identify the exact cells designated for input (usually highlighted or labeled)
2. Enter historical data first, then verify formulas are calculating correctly for those periods
3. Enter assumption drivers that feed forecast calculations
4. Review calculated outputs to confirm formulas are working as intended
5. If a formula cell must be modified, document the original formula before making changes

Handling Pre-Built Formulas

• If formulas reference cells you haven't populated yet, expect temporary errors (#REF!, #DIV/0!) until all inputs are complete
• When formulas produce unexpected results, trace precedents to identify missing or incorrect inputs
• Never delete rows/columns without checking for formula dependencies across all tabs

Step 3: Validating Formulas

Formula Integrity Checks

Before relying on template outputs, validate that formulas are functioning correctly:

Check Type	Method
Trace precedents	Select a formula cell → Formulas → Trace Precedents to verify it references correct inputs
Trace dependents	Verify key inputs flow to expected output cells
Evaluate formula	Use Formulas → Evaluate Formula to step through complex calculations
Check for hardcodes	Projection formulas should reference assumptions, not contain hardcoded values
Test with known values	Input simple test values to verify formulas produce expected results
Cross-tab consistency	Ensure the same formula logic applies across all projection periods

Common Formula Issues to Watch For

• Mixed absolute/relative references causing incorrect results when copied across periods
• Broken links to external files or deleted ranges (#REF! errors)
• Division by zero in early periods before revenue ramps (#DIV/0! errors)
• Circular reference warnings (may be intentional for interest calculations)
• Inconsistent formulas across projection columns (use Ctrl+\ to find differences)

Validating Cross-Tab Linkages

• Confirm values that appear on multiple tabs are linked (not duplicated)
• Verify schedule totals tie to corresponding line items on main statements
• Check that period labels align across all tabs

Step 4: Quality Checks by Sheet

Perform these validation checks on each sheet after populating the template:

Income Statement (IS) Quality Checks

• Revenue figures match source data for historical periods
• All expense line items sum to reported totals
• Subtotals (Gross Profit, EBIT, EBT, Net Income) calculate correctly
• Tax calculation logic is appropriate (handles losses correctly)
• Forecast drivers reference assumptions tab (no hardcodes)
• Period-over-period changes are directionally reasonable

Balance Sheet (BS) Quality Checks

• Assets = Liabilities + Equity for every period (primary check)
• Cash balance matches Cash Flow Statement ending cash
• Working capital accounts tie to supporting schedules (if applicable)
• Retained Earnings rolls forward correctly: Prior RE + Net Income - Dividends +/- Adjustments = Ending RE
• Debt balances tie to debt schedule (if applicable)
• All balance sheet items have appropriate signs (assets positive, most liabilities positive)

Cash Flow Statement (CF) Quality Checks

• Net Income at top of CFO matches Income Statement Net Income
• Non-cash add-backs (D&A, SBC, etc.) tie to their source schedules/statements
• Working capital changes have correct signs (increase in asset = use of cash = negative)
• CapEx ties to PP&E schedule or fixed asset roll-forward
• Financing activities tie to changes in debt and equity accounts on BS
• Ending Cash matches Balance Sheet Cash
• Beginning Cash equals prior period Ending Cash

Supporting Schedule Quality Checks

• Opening balances equal prior period closing balances
• Roll-forward logic is complete (Beginning + Additions - Deductions = Ending)
• Schedule totals tie to main statement line items
• Assumptions used in calculations match Assumptions tab

Step 5: Cross-Statement Integrity Checks

After validating individual sheets, confirm the three statements are properly integrated:

Check	Formula	Expected Result
Balance Sheet Balance	Assets - Liabilities - Equity	= 0
Cash Tie-Out	CF Ending Cash - BS Cash	= 0
Net Income Link	IS Net Income - CF Starting Net Income	= 0
Retained Earnings	Prior RE + NI - Dividends - BS Ending RE	= 0 (adjust for SBC/other items as needed)

Step 6: Final Review

Before considering the model complete:

• Toggle through all scenarios (if applicable) to verify checks pass in each case
• Review all #REF!, #DIV/0!, #VALUE!, and #NAME? errors and resolve or document
• Confirm all input cells have been populated (search for placeholder values)
• Verify units are consistent across all tabs
• Save a clean version before making any additional modifications

Model Validation and Audit

This section consolidates all validation checks and audit procedures for completed templates.

Core Linkages (Must Always Hold)

See references/formulas.md for all formula details.

Check	Formula	Expected Result
Balance Sheet Balance	Assets - Liabilities - Equity	= 0
Cash Tie-Out	CF Ending Cash - BS Cash	= 0
Cash Monthly vs Annual	Closing Cash (Monthly) - Closing Cash (Annual)	= 0
Net Income Link	IS Net Income - CF Starting Net Income	= 0
Retained Earnings	Prior RE + NI + SBC - Dividends - BS Ending RE	= 0
Equity Financing	ΔCommon Stock/APIC (BS) - Equity Issuance (CFF)	= 0
Year 0 Equity	Equity Raised (Year 0) - Beginning Equity Capital (Year 1)	= 0

Sign Convention Reference

Statement	Item	Sign Convention
CFO	D&A, SBC	Positive (add-back)
CFO	ΔAR (increase)	Negative (use of cash)
CFO	ΔAP (increase)	Positive (source of cash)
CFI	CapEx	Negative
CFF	Debt issuance	Positive
CFF	Debt repayments	Negative
CFF	Dividends	Negative

Circular Reference Handling

Interest expense creates circularity: Interest → Net Income → Cash → Debt Balance → Interest

Enable iterative calculation in Excel: File → Options → Formulas → Enable iterative calculation. Set maximum iterations to 100, maximum change to 0.001. Add a circuit breaker toggle in Assumptions tab.

Check Categories

Section 1: Currency Consistency

• Currency identified and documented in Assumptions
• All tabs use consistent currency symbol and scale
• Units row matches model currency

Section 2: Balance Sheet Integrity

• Assets = Liabilities + Equity (for each period)
• Formula: Assets - Liabilities - Equity (must = 0)

Section 3: Cash Flow Integrity

• Cash ties to BS (CF Ending Cash = BS Cash)
• Cash Monthly vs Annual: Closing Cash (Monthly) = Closing Cash (Annual)
• NI ties to IS (CF Net Income = IS Net Income)
• D&A ties to schedule
• SBC ties to IS
• ΔAR, ΔInventory, ΔAP tie to WC schedule
• CapEx ties to DA schedule

Section 4: Retained Earnings

• RE roll-forward check: Prior RE + NI + SBC - Dividends = Ending RE
• Show component breakdown for debugging

Section 5: Working Capital

• AR, Inventory, AP tie to BS
• DSO, DIO, DPO reasonability checks (flag if outside normal ranges)

Section 6: Debt Schedule

• Total Debt ties to BS (Current + LT Debt)
• Interest calculation ties to IS

Section 6b: Equity Financing

• Equity issuance proceeds tie to BS Common Stock/APIC increase
• Cash increase from equity = Equity account increase (must balance)
• Equity Raise Tie-Out: ΔCommon Stock/APIC (BS) = Equity Issuance (CFF) (must = 0)
• Year 0 Equity Tie-Out: Equity Raised (Year 0) = Beginning Equity Capital (Year 1)

Section 6c: NOL Schedule

• Beginning NOL (Year 1 / Formation) = 0 (new business starts with zero NOL)
• NOL increases only when EBT < 0 (losses must be realized to generate NOL)
• DTA ties to BS (NOL Schedule DTA = BS Deferred Tax Asset)
• NOL utilization ≤ 80% of EBT (post-2017 federal limitation)
• NOL balance is non-negative (cannot utilize more than available)
• NOL generated only when EBT < 0
• Tax expense = 0 when taxable income ≤ 0

Section 7: Scenario Hierarchy

• Absolute metrics: Upside > Base > Downside (NI, EBITDA, FCF)
• Margins: Upside > Base > Downside (GM%, EBITDA%, NI%)
• Credit metrics: Upside < Base < Downside for leverage (inverted)

Section 8: Formula Integrity

• COGS, S&M, G&A, R&D, SBC driven by % of Revenue (no hardcodes)
• Consistent formulas across projection years
• No #REF!, #DIV/0!, #VALUE! errors

Section 9: Credit Metric Thresholds

• Flag metrics as Green/Yellow/Red based on covenant thresholds
• Summary of any red flags

Master Check Formula

Aggregate all section statuses into a single master check:

• If all sections pass → "✓ ALL CHECKS PASS"
• If any section fails → "✗ ERRORS DETECTED - REVIEW BELOW"

Quick Debug Workflow

When Master Status shows errors:

1. Scroll to find red-highlighted sections
2. Identify which check category has failures
3. Navigate to source tab to investigate
4. Fix the underlying issue
5. Return to Checks tab to verify resolution