Top 14 Must-Read Financial Modeling Books For Finance Professionals - IIM SKILLS (2024)

We all know that the best way to learn anything, is, through practice. The same applies to Financial Modeling as well. Several institutes provide excellent financial modeling training. A great many research materials, videos, and case studies are available online, to guide you through various aspects of financial modeling. However, if you prefer to learn financial modeling by reading books, then we have a few suggestions. In this article, we will provide you with a list of the best Financial Modeling books available to help you to learn financial modeling.

Based on individual requirements, we are classifying the list of fourteen best Financial Modeling books into four broad categories:

• Beginner’s Level
• Intermediate Level
• Advanced Level
• Professional Level

Beginner’s Level

This level comprises Financial Modeling books that explain the essentials of financial modeling. These include –

1. Financial Modeling: by Simon Benninga

The only subject on which Benninga’s book is entirely focused is financial modeling. Of all the financial modeling books, this book is a must-read if you want to become a true Excel “master” and complete your skill set. It shows how to use Excel to implement financial models.

It describes how to use financial models in Excel. Excel spreadsheets in great detail are used to describe both fundamental and sophisticated models in the fields of corporate finance, portfolio management, options, and bonds. Financial Modeling is a comprehensive reference for the financial modeler and includes sections on technical elements of Excel and using Visual Basic for Applications (VBA).

The book is loaded with a wealth of novel methodologies for corporate valuation based on accounting data that only needs a few valuation factors, making it one of the best resources for a hard-core understanding of the tools and strategies used in a sophisticated way of performing financial analysis. Every reader looking for an abundance of realistic, simple-to-apply, detailed, and novel quantitative finance methods should try this.

Major sections of the book include –

• Corporate finance

• Portfolio management

• Excel Spreadsheets

• Financial issues can be resolved with Excel software.

• Tips on how to get actual data from the internet

• Concepts of current corporate finance, investments, and derivatives

Check out our article on the complete guide tofinancial modeling and its important concepts.

2. Mastering Financial Modeling in Microsoft Excel: by Alastair Day

Anyone wishing to grasp Excel financial modeling should read Alastair Day’s book. The book comes highly recommended because the author does a superb job of demystifying and making understandable complicated concepts. It offers in-depth tools and techniques that will help you create, develop, and deploy financial models using Microsoft Excel so you can get better, more precise results more quickly.

The book is structured into two sections: the first section provides templates, major features, and methodologies while outlining model designs. The book’s second section demonstrates how to create Excel corporate financial models. You can use and modify models and templates using the accompanying CD.

The main areas dealt with in this book are –

• Design, methodology, and procedures for spreadsheets.

• Methods for evaluating and enhancing current models.

• How to prevent expensive errors by testing each scenario.

• Which Excel functions and formulae to employ for various tasks, as well as how to identify new variables.

3. Financial Modeling: by Joerg Kienitz and Daniel Wetterau

Through simulation methodologies, calibration even for exotic options, etc., this book helps the reader to model, build, and execute a wide variety of financial models for asset allocation and derivatives pricing. It offers practitioners a complete financial modeling workflow, from model selection to deriving prices and Greeks using (semi-)analytic and simulation techniques, and calibration even for exotic options.

The first section examines financial markets in general and examines the sophisticated models required to account for observable structures. Diffusion-based models like stochastic-local volatility models and (pure) jump processes are reviewed.

The second section covers numerical methods based on direct integration and Fourier transforms and describes how to use them to implement the COS, CONV, Carr-Madan method, or Fourier-Space-Time Stepping enabling readers to use the models from the first section for pricing and risk management.

The third section is devoted to using Matlab, introducing the program by outlining the fundamental features used in financial engineering.

This book comprises facts about –

• Using MATLAB and its fundamental functions for financial engineering,

• risk-neutral density, implied volatility surfaces, option pricing, and typical routes for a variety of models, including SABR, Heston, and Bates.

• Using MATLAB and its fundamental functions for financial engineering.

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4. Foundations of Real Estate Financial Modeling: by Roger Staiger

Pro forma modeling for real estate projects is specifically covered in the book Foundations of Real Estate Financial Modeling. The book provides a step-by-step tutorial for building financial models using Excel before introducing students and experts to real estate finance theory fundamentals. The discussion is built around the notion that real estate is an asset with distinctive qualities that may be changed in both a physical and financial sense.

Other chapters on risk quantification cover waterfalls, securitized goods, scenarios, stochastic, and Monte Carlo simulations. This book will improve students’ Excel modeling skills before they enter the workforce and is the perfect complement to fundamental real estate finance texts. People can learn how to build a scalable and modular real estate financial model using the book’s step-by-step instructions.

It includes information on:

• Amortization

• Equity Bifurcation

• Single-Family Unit

• Multi-Family Unit

• Accounting Statements

• Development Additions

• Further Asset Classes

Intermediate Level

The next step is the Intermediate level where consolidation and extension of knowledge are done. At this level, we explore financial modeling books about the practical implementation of complex ideas of financial modeling. These books are –

5. Financial Modeling in practice: A Concise Guide for Intermediate and Advanced Levels: by Michael Rees

This book would be of great value to a financial expert looking to gain knowledge of the methods and approaches for financial models that are appropriate to the facts of the most common business environments. Michael Rees takes the reader step-by-step through a wide range of useful tools and strategies that may be used for creating financial models in the everyday reality of the corporate world in his book, “Principles of Financial Modeling.” The book creates a thorough manual for creating adaptable, fully dynamic financial models that are suited to a wide range of company decision-making circ*mstances. It is made from a wealth of tried-and-true materials for financial consulting and training.

With a focus on data structure and layout optimization, financial transparency, balance, managing circularity, and financial model audition, the book blends financial modeling principles with industry best practices. Additionally, a wide range of financial modeling techniques is covered in the books, including sensitivity and scenario analysis, data analysis, and the use of Excel and Visual Basic for Applications (VBA) functionalities. For any professional looking to gain a comprehensive and in-depth understanding of financial modeling for various real-world applications, “Principles of Financial Modeling by Michael Rees” is essential reading.

The key features of this book are –

• Financial statements models

• Valuation of cash flow

• Options and real options

• Risk Analysis

6. Financial Analysis and Modeling using Excel and VBA: by Chandan Sengupta

Sengupta’s book is meant for you if you want to understand how to include VBA into your models. It provides a thorough method for utilizing Excel 2007 and VBA to analyze financial issues and create basic to complex financial models in all significant areas of finance.

This book leads you through a wide selection of real-world financial issues and models that you can learn from, use for practice, and readily adapt for use in the workplace and the classroom. It also reviews all the pertinent financial theories and ideas.

Key features of this book are –

• The Ribbon, PivotTables, data analysis, and statistical analysis are all features of Excel that are crucial for financial analysis and modeling.

• Financial modeling and analysis, as well as advanced Excel and VBA capabilities, are taught utilizing a step-by-step, “hands-on,” learn-by-doing methodology.

• Learning to construct formulas quickly to provide what-if answers and iteratively solve problems.

• How to maximize Excel and VBA techniques.

7. Financial Modeling and Valuation: by Paul Pignataro

This book instructs you in the essential techniques for precisely determining the soundness of stock investment and was written by the Founder and CEO of the acclaimed New York School of Finance. It also instructs you on the basic tools for estimating stock investments. What sets this book apart from other Financial Modeling books, is that it is based on a comprehensive case study of Wal-Mart and walks you through every step of creating a sophisticated financial model, much like professional Wall Street analysts do. It demonstrates how to conduct a thorough analysis of the company’s financial position. As you turn the pages of the book, you will build a complete financial model and valuation step-by-step.

Key highlights of this book are –

• Financial modeling tutorials that use Wall Street models can be downloaded

• A comprehensive discussion of valuation methods, including LTM data calculation, EBITDA and Net Income smoothing, chapter-end queries,

• practice models, supplementary case studies, and typical interview questions

8. Investment Valuation: Tools and Techniques for Determining the Value of any Asset: by Aswath Damodaran

This book presents Investment valuation methodologies with the signature clarity and zeal of the author, Aswath Damodaran. It was developed through years of financial experience, tested, and confirmed at his many jam-packed conferences. It is equipped with a variety of investment valuation models and comprehensive advice on choosing the best valuation model for a given asset valuation scenario for professionals and students who want to constantly succeed in the investment industry. The author addresses all potential asset valuation situations in the book, including those involving start-ups, unusual assets, troubled businesses, private stocks, and real estate.

“Investment Valuation” is a great resource for professionals interested in using value enhancement methods like the CFROI and probabilistic valuation methods like the decision tree and Monte Carlo approaches. The book offers reliable reference material with in-depth coverage of “relative” valuation methods. The book “Investment Appraisal” provides all the information you require in one comprehensive resource if you are seriously considering strengthening and developing your investment valuation skills for any significant project.

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Advanced level

At this level, candidates employ scenarios to add a more dynamic variety of outcomes to a model. Some of the must-read financial modeling books in this category are –

9. Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisition: by Joshua Rosenbaum and Joshua Pearl

This book, written by Joshua Rosenbaum and Joshua Pearl, is intended for advanced readers who are already familiar with the financial sector or for those who are curious about entering the investment banking industry. It covers all the pertinent topics, including financial modeling for valuation, leveraged buyouts, and mergers and acquisitions, and it takes you step-by-step through the Investment Banking process. Each chapter begins with a summary of the process and major ideas before delving deeply into the practical facets of creating the actual models. The authors will also go over how they set up their spreadsheets and how to set up Excel so that the analysis can be done more quickly.

Whereas other publications explain the issues in a more complex manner, it is clear that the authors are attempting to make the pertinent financial ideas simpler. The book is written by an investment bank and takes a very practical, “nuts and bolts” method. It provides a great foundation for learning more about financial modeling and valuation.

10. Measuring and Managing the Value of Companies: by Tim Koller, Marc Goedhart, and David Wessels

This is the original valuation guide from McKinsey & Company. The analysis of the idea of Economic Value Add, which is the excess value a firm should produce when compared to its cost of capital, is the fundamental distinction between this book and other ones.

This book is for someone who seeks theoretically sound approaches and strives for valuation accuracy. It’s more of a stock investor book since it helps them determine whether a firm performs as it should or if it devalues the company’s stock. Small business valuations typically demand a more realistic approach to valuation. It provides you with a thorough understanding of both the business drivers and the valuation process. It’s one of the best books among all financial modeling books if you want to learn more about valuation in-depth, and many investment bankers, valuation specialists, and financial consultants have read it.

This book focuses on –

• Value-adjust business methods to encourage better decision-making

• Recognize the companies that a corporate parent is most suited to possess.

• Evaluate significant transactions, including purchases, sales, and restructurings.

• Create a finance structure that supports your business plan and reduces risk.

11. The Handbook of Post Crisis Financial Modeling: by Emmanuel Haven and Philip Molyneux

Leading experts in banking, mathematics, and law are brought together in this one-of-a-kind Handbook to present original research on the key topics influencing financial modeling after the 2008 financial crisis. The Handbook looks at distributional assumptions, efficiency, and how financial modeling could be reinterpreted in the wake of the 2008 financial crisis.

This book represents novel research on the crucial challenges impacting financial modeling. It explains the subjects that are relevant to Excel modeling. The subjects include-

• Role of banks and governments

• Policy Making

• Economic and financial factors

Professional Level

This final stage is for professionals who are set to build financial models. The suggested financial modeling books in this category are –

12. Financial Modeling for Business Owners and Entrepreneurs: by Tom Y. Sawyer

Tom Y. Sawyer simplifies the challenges of creating specific financial models for small and medium-sized enterprises using the Excel program in his book, “Financial Modeling for Business Owners and Entrepreneurs.” The comprehensive book combines logical business ideas with methodical approaches for utilizing Excel to plan and model enterprises to address particular business issues. What sets this book apart from the financial modeling books, is that it has been expertly written to serve as a helpful manual for business owners and entrepreneurs who want to break down their entire company into operational and functional components that can be statistically modeled most straightforwardly and understandably.

For entrepreneurs, senior corporate executives, and managers, Tom Sawyer’s Excel tutorial is ideal. It combines financial modeling with fundamental business ideas and goals, and it offers detailed instructions for solving particular company issues. Some of its highlights are –

• How to effectively and simply link financial modeling with business planning

• Learn how to quickly create and test different assumptions and hypotheses related to your business model.

• Provides a clear, easy technique for formulating ideas and evaluating many potential routes for a startup’s finance model.

• Focuses on maintaining a project management perspective that will enable you to consistently direct your time and effort toward the things that are the most important and urgent for the successful expansion of your organization.

13. Building Financial Models: by John Tija

Building Financial Models by the author, who has been actively involved in creating financial models for renowned financial institutions since the mainframe days, exhibits a singular pioneering viewpoint.

The book is keen to provide an explicit and conclusive understanding of critical and new concepts in financial modeling, such as iterations, one-off versus template models, revolver and circular references, and integrated financial statement projection models. It is an excellent and adventurous trip into the world of financial modeling. This book is a must-have for anyone interested in financial modeling books and who wants to cover every possible angle.

The important components of this book are –

• What projection models are, how to use them, and how they might differ by industry

• Working financial models are supported by accounting and finance ideas.

• Detailed instructions for creating dynamically effective financial models using spreadsheet software

• the creation and design of a projection model that enables quick input changes for sensitivity analysis

15. Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports: by Thomas Ittelson

Financial reporting and accounting are essential tools that should not be the main focus of accountants and finance specialists, as non-financial business owners and managers would agree. Thomas Ittelson demystifies the world of financial accounting and reporting in the book “Financial Statements” in a way that is understandable to non-financial managers, small- and medium-sized business owners, lawyers, and MBA students. Both financial experts and non-financial professionals can use this book as a step-by-step guide to the development and analysis of financial reports.

Without oversimplifying financial concepts to the point that they become inaccurate representations of reality, this book aids non-financial professionals in understanding financial accounting. People who aren’t inclined toward business in the financial sector should study this book among all other financial modeling books.

FAQs

1. What are the prerequisites for learning Financial Modeling?

The following are the basic requirements before you start training in Financial Modeling –

• Thorough knowledge of accounting

• Excellent Excel skills

• Being able to connect the three financial statements

• Knowing how to develop a forecast

• A methodical approach to problem-solving

• The ability to condense a lot of information into a concise format requires attention to detail.

2. What is the importance of practicing Financial Modeling?

Financial modeling helps you to :

• Speak intelligently and avoid being exploited

• Examine the various scenarios that can be used with all financial models.

• Cover for your team in crucial situations

• Present your financial models

• Recognise and hire the top financial modelers

3. Which phase comes last in building a financial model?

The penultimate stage is to create diagrams, graphs, and other outputs that can be utilized to quickly convey the model’s data.

Conclusion

We hope this list of financial modeling books will be useful to you in creating financial models on your own. However apart from theoretical knowledge, if you are looking for some hands-on training on Financial Modeling, do check out the Financial Modeling course offered by IIM SKILLS. Happy reading, happy learning!

• Thorough knowledge of accounting

• Excellent Excel skills

• Being able to connect the three financial statements

• Knowing how to develop a forecast

• A methodical approach to problem-solving

• The ability to condense a lot of information into a concise format requires attention to detail." } },{ "@type": "Question", "name": "2. What is the importance of practicing Financial Modeling?", "acceptedAnswer": { "@type": "Answer", "text": "Financial modeling helps you to :

• Speak intelligently and avoid being exploited

• Examine the various scenarios that can be used with all financial models.

• Cover for your team in crucial situations

• Present your financial models

• Recognise and hire the top financial modelers" } },{ "@type": "Question", "name": "3. Which phase comes last in building a financial model?", "acceptedAnswer": { "@type": "Answer", "text": "The penultimate stage is to create diagrams, graphs, and other outputs that can be utilized to quickly convey the model's data." } }]}