What is Three Financial Statements?

The three core financial statements provide a complete picture of a company's financial health. They are the Income Statement, the Balance Sheet, and the Cash Flow Statement.

For Startups: Investors require all three statements for due diligence. The Income Statement shows profitability, the Balance Sheet provides a snapshot of assets and liabilities, and the Cash Flow Statement reveals how cash is moving through the company—often the most critical of the three for a startup.

For SaaS: Accrual-based accounting is essential. The Balance Sheet will show Deferred Revenue as a liability, and the Cash Flow Statement will show the actual cash collected from customers, which can differ significantly from the revenue recognized on the Income Statement.

Example: A SaaS startup may be profitable on its Income Statement but have negative cash flow because it's investing heavily in growth.