Keen on finding the best financial modeling books?
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If knowledge is power, books are the path that could lead you to it. For thousands of years, humans have trusted books to learn new skills or impart knowledge. Through books, people who have gained insight and wisdom through their own experiences guide you in making better decisions and acquiring new skills.
Financial modeling has undoubtedly gained prominence over the past few years because of its intrinsic nature of being able to analyze and predict the performance of a business. Thus, it helps in optimizing profits, recognizing investment opportunities, and helps with learning the strengths and challenges of a business.
“Read the best books first, or you may not have a chance to read them at all.”
Henry David Thoreau
If you are a financial analyst or are interested in learning about the world of finance, here are the 10 best financial modeling books to read in 2022:
1. Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity by Paul Pignataro
About the book:
This is probably the best-rated Financial Modeling book. It is written by Paul Pignataro who is the Founder and CEO of the prestigious New York School of Finance. This book teaches the fundamental tools for accurately assessing a stock investment. All in all, at 432 pages, this is book is ideal for universities or business students looking to learn Financial Modelling and break into the investment banking field.
Furthermore, it is written on a full-length case study of Wal-Mart and shows you how to perform an in-depth analysis of a company’s financial standing, as done by professional Wall Street analysts. You will learn how to construct a full-scale financial model and step-by-step valuation as you go through the book. Hotkeys and clear Excel instructions help even the novice excel modeler. Income Statement, Cash Flow Statement, Balance Sheet, Balance Sheet Balancing Techniques, Depreciation Schedule, working capital schedule, debt schedule, handling circular references, and automatic debt pay downs are all covered in this book.
Take aways:
Illustrative concepts like detailing model flow help in conceptual understanding. All the concepts are reiterated which is helpful for a beginner yet detailed enough for a professional. This book also includes in-depth coverage of valuation techniques commonly used by Wall Street professionals and illustrative comparable company analyses – built the right way from historical financials, calculating LTM (Last Twelve Month) data, calendarization, and smoothing EBITDA and Net Income.
It also takes up Precedent transactions analysis and details how to extract proper metrics from relevant proxy statements, Discounted cash flow analysis and how a DCF is utilized, how unlevered free cash flow is achieved, and the meaning of weighted average cost of capital.
2. A Fast Track to Structured Finance Modeling, Monitoring, and Valuation by William Preinitz
About the book:
This Financial Modeling book is designed to start with basic examples that progressively develop the reader’s confidence to handle more complex tasks. It has a little theoretical discussion about computer science, operations research algorithms, mathematics, and finance. Written by Preinitz, the aim of the book is to teach how to break complex tasks into simple ones. It then delves into teaching to implement those simple tasks into VBA code using a critical subset of the language.
It is a super straightforward book starting with chapters that discuss the basic questions of Why, What, Who, Where, and How, and then the process of securitizing a loan portfolio and understanding the excel waterfall. The following chapter deals with designing the VBA Model and laying the Model Groundwork. Recorded Macros: A First Look at the VBA Language is the seventh chapter of the book.
Take aways:
The next few chapters teach the reader how to write menus and discuss data, ranges, arrays, and objects and how to control the flow of the model. Building Messaging Capabilities, Designing the Model’s Reports, Main Program and Menus, Writing the Collateral Selection Code, Calculating the Cash Flows, and Running the Waterfall: Producing Initial Results are the tentative content covered in this book. Debugging, validating, and running the Model are covered in depth in this book.
Willian Preinitz also does a good job of explaining how to build additional capabilities, document the model, and manage its growth. In the end, it explains the process of building a portfolio monitoring model and valuation techniques that teach how to determine the price. At 744 pages this is a book that teaches Financial Modeling from scratch.
3. Financial Modeling for Business Owners and Entrepreneurs: Developing Excel Models to Raise Capital, Increase Cash Flow, Improve Operations, Plan Projects, and Make Decisions by Tom Sawyer
About the book:
This is one of the most important financial modeling books any analyst or entrepreneur should read. It combines logical business principles and strategies with a step-by-step guide for planning and modeling a company. It teaches you to create operational and financial models in Excel. Solving business problems and describe the workings of a company in quantitative terms.
This book explains how to break a company down into basic functional and operational components which can be modeled. It helps you avoid the traps and dead ends many businesses fall into.
Take aways:
Reading this book teaches you to create financial models that will bring you the funding you need to launch a business or maybe a new product and also to create models that will act as guideposts for ongoing operations. This way you will always be aware of where you stand financially, and where you need to get.
In a nutshell, reading this book will help you learn how to raise capital for a startup, make astute business decisions, streamline operations, plan projects and new initiatives, manage budgets, and improve efficiency while reducing costs.
In addition to many exercises and tips for using Excel to model a business, this book offers practical advice gained from real-life lessons, advanced strategies, and the insightful use of skills. With a basic knowledge of Excel, it will help you learn to think like an experienced Financial Analyst.
4. Financial Modelling in Practice by Michael Rees
About the books:
Financial Modelling in Practice is a concise financial modeling book for both intermediate and advanced levels. It is a practical and in-depth guide to financial modeling designed to build robust and readily understandable models. Based on Micheal Rees’ extensive experience in building financial models, and in training others on how to do so, this book begins with a review of Excel functions such as Lookup functions, database, and statistical functions among others. It also discusses the principles of designing, structuring, and building accurately and readily understandable models. Then it progresses to the application areas, such as modeling financial statements, valuation of cash flow, risk analysis, and finally, deals with the topic of financial modeling using VBA. Practical examples are plenty throughout the book and model examples are included in the CD-ROM.
Take aways:
With its focused, practical, and application-driven approach, this book helps intermediate and advanced level modelers in Excel to extend and consolidate their knowledge, and build or audit financial models.
At just 292 pages, this is a short but powerful read.
5. Principles of Finance with Excel by Simon Z. Benninga
About the book:
This is the first financial modeling book that comprehensively integrates Excel into the teaching, understanding, and practical use of finance.
Unlike many books of its time which heavily rely on on-hand calculators, Principles of Finance is an Excel-based approach that gives better tools to the teacher and the student and combines the educational message with a useful financial tool. This book has helped many students who often find themselves confused and clueless once they leave the academic environment and ultimately end up relearning both finance and Excel.
Take aways:
The message is clear: Excel is a part and parcel of The Practice of Finance. As every Excel user knows, a spreadsheet gives new and deeper insights into financial decision-making. It is not just a “computational tool”, but a slightly more updated twist on the calculator.
At 924 pages, this book is an excellent way to learn the fundamentals of finance and apply them to individual needs using Microsoft Excel as an analysis tool.
6. Building Financial Models by John Tjia
About the book:
This financial modeling book is widely considered a guidebook for students and professionals who want to venture into the world of financial modeling. It outlines step by step how to design and implement a model.
Building Financial Models is divided into four main parts. The first part is like doing a crash course in Excel (and a little accounting), and then comes three heavy chapters (11 – 13) that deal with building an integrated financial model. There is a section that has mixed add-ons to the basic model that include financial ratios, a note to building a DCF model, etc. In the end, Tjia gives a good explanation of Visual Basic.
Take aways:
It is one of the best books that serve as an instructional guide with a heavy emphasis on the presentation aspect, designing, building, the creation of precise financial models, and implementing a core valuation or projection model. John Tjia helps the readers easily implement learning in practical projects to become a pro at financial modeling.
This book is a guiding light for beginner financial modelers as it teaches them to increase all the skills required to excel in a finance career. The techniques and strategies mentioned have the characteristics of clarity, and brevity which help one to master the fundamentals and also the advanced elements without much difficulty.
At 340 pages, it is a must for anyone who wants to efficiently formulate mathematical computations using Excel.
7. Best Practices for Equity Research Analysts: Essentials for Buy-Side and Sell-Side Analysts by James J. Valentine
About the book:
James Valentine has used his decades-long experience as a successful security analyst and written a comprehensive financial modeling book which also opens up a window into the world of securities research.
In today’s fast-paced markets with their high-pressure nature, analysts cannot afford to make mistakes. This book covers the necessary balance between practice and theory. Instead of rehashing the basics of finance, it takes up and explains all the non-academic topics and covers how analysts should manage their time, contacts, data, and resources.
Take aways:
Elegantly organized to be used as a learning tool, “Best Practices for Equity Research Analysts” covers the important areas of an analyst’s role: Identifying and observing critical factors, and creating and updating financial models that forecast price targets or a range of targets, improving valuation and stock-picking techniques, making ethical decisions and communicating your message effectively.
At 464 pages, this book is required reading for beginner analysts and a must-read for all analysts who want to develop the skill.
8. Financial Modeling by Simon Z. Benninga
About the book:
Simon Benninga is the Dean of Faculty and a Professor of Finance at Tel Aviv University. He is a Visiting Professor of Finance for the Wharton School at the University of Pennsylvania.
In this highly rated Financial Modeling book, Simon Benninga takes the reader step by step through several models and shows how they can be solved using Microsoft Excel. Too often, finance books fall short of making a connection between textbook finance and real-world business problems. Bridging this gap between theory and practice, Benninga provides an in-depth guide to solving common financial models with spreadsheets. It offers significant material, with chapters covering topics such as bank valuation, Monte Carlo methods, the Black-Litterman approach to portfolio optimization, using an array of functions and formulas, and their applications to option pricing. Other chapters, discuss basic financial calculations, generating random numbers, portfolio models, and calculating the variance-covariance matrix all of which offer substantially new and improved material.
Take aways:
This is a comprehensive book explaining financial statement modeling, value at risk (VaR), real options, leasing, duration and immunization, and also term structure modeling. It also includes in detail technical topics such as data tables, the Gauss-Sidel method, matrices, and tips and tricks. The final section of the book covers the Visual Basic for Applications (VBA) techniques which is a must for every book on financial modeling. It comes with a CD containing Excel worksheets and solutions for all the exercises.
This is a big book with 1133 pages. It is an amazing resource that walks the reader through finance principles and makes it easier with examples using Excel.
9. Financial Forecasting Analysis and Modeling by Michael Samonas
About the book:
Samonas has written a financial modeling book that covers forecasting, budgeting, analysis, reporting, and modeling for long-term gains.
It also includes in-depth chapters on planning, projection, sensitivity analysis, and the Monte Carlo Method of financial modeling.
By adopting a rigorous learning approach, this book provides a step-by-step guide for the entire process of project development. The reader learns how to effectively make predictions for the business to produce profit in the long run. A variety of features that helps in creating robust financial models and also offer flexibility are covered.
Take aways:
By giving a detailed idea of all the financial modeling concepts, this book helps to learn iMS Excel comprehensively. Concepts like, and Monte Carlo simulation are covered in-depth.
It is a professional-level book that covers risk analysis and sensitivity analysis, Monte Carlo simulation. It also deals with advanced concepts of Financial Modeling and Excel.
At 232 pages, this is a power-packed book. It focuses on uncertainty in modeling and therefore becomes a comprehensive guide to the engineers of modern finance.
10. Financial Analysis and Modeling using Excel and VBA by Chandan Sengupta
About the book:
This is one of the top financial modeling books that helps the reader understand visual basics applications i.e VBA in-depth. This book extensively covers VBA and enables the reader to understand how to incorporate it into financial models. It provides a comprehensive approach to analyzing financial problems and developing financial models
Take aways:
Using a learn-by-doing approach it teaches graphs, charts, reports, custom forms, processing, automation, and many different functions. Some of the other concepts explained are data analysis, statistical analysis, sensitivity analysis, and tables.
It includes a range of practical projects that makes use of powerful features of Excel. The Ribbon interface and PivotTables are essential for financial analysis and modeling.
At 748 pages, this book helps to learn these concepts with a step-by-step learning approach. This book is a gold mine for candidates interested in thorough VBA practice and becoming proficient in financial modeling.
Bonus!
There is a plethora of ways by which you can up-skill yourself in financial modeling thoroughly. Apart from financial modeling books, you can find many blogs, videos, and courses available.
Henry Harvin- We Make Educated Employable | 100+ Courses with Gold Membership & Unlimited Access
If you are one of those people who prefers courses to books do check out Henry Harvin Institute. It offers the best course in Financial Modeling. Following is a quick look at what you can expect from the course:
- Hands-on Training on Excel Workbooks
- Live classes
- Most in-demand Prerequisites for Finance professionals in India
- Interactive Classroom sessions
- Industry-relevant content
- Case-studies based hands-on training
- Training: 40 Hours of Live Online Interactive Sessions
- Projects: Offers projects in Escalation Resource Management, Benefits realization, Stakeholder Management, and more
- Internship: Internship Assistance is provided to gain practical experience
- Certification: Embellish your profile with the global credential of the Certified Financial Modelling Professional Course. Distinguish your expertise by showcasing the Hallmark of CFMP
- Placement: 100% Placement Support
- Abundant E-Learning Access, Tools and Techniques, assessment, offline video content, and more
- Bootcamps: Regular Bootcamps spread over a year
- Hackathons: Free Access to #AskHenry Hackathons and Competitions
- Membership: offers 1-Year Gold Membership of Henry Harvin® Finance Academy for the Certified Financial Modelling Professional Course
Conclusion:
So these are considered the top financial modeling books. Anyone trying to be a part of the world of finance should read them. The list here particularly includes books that may come in useful to complete beginners as well as professionals. It helps to prepare a thorough report on how to generate the maximum profits through wise investment opportunities. It also allows to convert vague ideas about Financial Modeling into something more concrete.
All the books mentioned above have a lot of practical examples and worksheets that further enhance the readers’ understanding of the subject and the many other components associated with it. Choose one or more books and give them a sincere and diligent reading. Working on all the exercises and worksheets would definitely help the reader to become a pro in the shortest time possible
FAQs
Financial modeling books are excellent resources for anyone interested in learning the art of financial modeling. Today, there are many impeccably formulated and meticulously written books that teach the readers the principles of perceptiveness, the importance of attention to detail, and the ability to deal with huge amounts of data and then comprehensively format them for management. Through examples, exercises, and an organized, practical approach to the learning process Financial modeling books become a treasure trove for all financial modelers.
Some of the important skills to learn to become an expert financial modeler are as follows:
Advanced Excel Skills
Being Proactive in Risk Management
Analyzing financial Statements acutely
Problem Solving Ability
Forecasting and Budgeting Techniques
Collecting historical data and finding the most useful information from it
There are various jobs available. There is a huge demand for professionals having the necessary skill sets. With the proper talent, education, knowledge, experience, and network one can expect great offers from companies. There is a vast range of roles and opportunities available. You can work as a:
Financial Manager
Business Analyst
Financial Analyst
Associate Analyst
Market Research Analyst
Equity Analyst
Financial modeling has great importance in sectors like:
Investment Banks
Equity Research
Financial KPOs
Project Finance companies.
Credit Rating Agencies
Mutual Funds
Some other courses you might be interested in:
Financial Analytics Practioner (CFAP) Course
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