Which balance-sheet line balances your 3-statement model — the plug?
In a cleanly built 3-statement model, the balance sheet is the last statement built, and cash is the plug.
The income statement is forecast-driven (top line × margins). The cash flow statement is derived from the income statement plus WC assumptions plus capex. The closing-cash figure (opening cash + ΔCash from the cash flow statement) is then carried into the balance sheet. All other balance-sheet items — PP&E, AR, AP, debt, and equity — are forecast separately. If assets and liabilities & equity don't match at the end, there is a model error.
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- Capex double-counted (in the PP&E forecast AND the cash change).
- Dividends not deducted from retained earnings.
- Debt drawdowns or repayments not synced between the balance sheet and the CF.
- Deferred taxes forgotten.
Before every senior review a 'balance check row' is mandatory — if assets − liabilities & equity = 0 for all forecast years, the model is structurally clean. Otherwise the model inevitably comes back with red marks.