Module VI· Three-Statement Model MechanicsIntermediate
Question
What does 'plug' mean in a three-statement model?
Answer
A plug is a line that balances the model when another variable is unknown. Common plugs are cash, revolver, or equity funding. Plugs should reflect business logic, not hide errors. In a debt model, excess cash may repay debt; if cash is short, the revolver draws. A balance-sheet imbalance should never be fixed with a fake plug.