Understanding the Three Financial Statements: A Visual Guide

"What gets measured, gets managed." If you're an entrepreneur who feels overwhelmed by spreadsheets or unsure which products are actually driving profit, this video is for you.

In this primer, I break down the complex world of finance into simple, actionable steps. Drawing from a career on Wall Street—from $3B airline deals to helping local school bus companies—I distill the "language of business" into three core pillars.

Files from the Video

• Financial Statements Overview (PDF) - View or download the slides
• Financial Statements Model (Spreadsheet) - View or download the working model

Video Timestamps

• 0:12 - What is the value of knowing the three financial statements?
• 1:33 - My credentials
• 2:58 - Overview of the three financial statements
• 4:22 - Walkthrough of the Income Statement
• 7:25 - Walkthrough of the Cash Flow Statement
• 10:25 - Walkthrough of the Balance Sheet
• 15:50 - Overview of actual SaaS business model in detail

Key Takeaways

The "Fitness Plan" Analogy

Think of your financial statements like a fitness plan:

• Income Statement = Your exercise log (tracks your activity and operations over time)
• Cash Flow Statement = Your calorie tracker (what actually hits your bank account)
• Balance Sheet = Your progress pictures (a snapshot at a specific moment in time)

Why This Matters for Entrepreneurs

1. Prioritization - Know which products and services are most profitable so you can focus your time where it matters
2. Avoid Surprises - Get ahead of problems like pricing models that don't scale before they become existential crises
3. Speak the Language - Finance is the language of business. Understanding it gives you access to better partners and capital

How the Three Statements Connect

The statements aren't isolated—they flow into each other. Your net income from the Income Statement becomes the starting point of your Cash Flow Statement. Your ending cash balance and accumulated earnings then appear on your Balance Sheet. Together, they paint a complete numerical picture of your business.

Ready to Build Your Own Financial Plan?

At Occam's Model, we provide guided, error-free financial planning tools that help you prioritize what matters, avoid surprises, and grow your business with confidence. Try our free app to get started, no account required.

Questions? Reach out at joao@occamsmodel.com or leave a comment on the video.