Module VI· Three-Statement Model MechanicsIntermediate
Question

Why does a forecast balance sheet automatically balance if cash is linked correctly?

Answer

If all income statement flows, working-capital changes, investing flows, financing flows, and equity movements are linked correctly, the cash flow statement calculates the exact change in cash needed to reconcile the balance sheet. Ending cash becomes the balancing asset. If cash is correct and the balance sheet still does not balance, another asset, liability, or equity roll-forward is wrong.