Balance check

It is the model testing its own plumbing. If the three statements are linked correctly, assets equal liabilities plus equity in every projected period, and the check row reads zero across the whole forecast.

Two habits make it useful rather than decorative. Write it as a live formula, and run it for every period rather than the first. A model that balances in the first projected year and breaks in the fourth is the ordinary failure, and reading only the first column is exactly how it survives to a client meeting.

When it is not zero, the shape of the error narrows the search before you open a single cell. A gap of constant size starting in one year means a single event in that year hit one statement and not the other. A gap that grows every year means a recurring flow is landing in one place only, with capital expenditure and debt repayments the usual candidates. A gap equal to a figure you recognise elsewhere in the model has usually already told you where it came from.

The limitation is the part worth saying out loud in an interview. It proves the links hold and nothing else. A model can balance perfectly in every period while assuming a margin the business has never earned, which is why external checks on margin, implied multiple and terminal value share sit alongside it rather than being replaced by it.