18 Best Books on Financial Modeling

This book will provide managers with an approach not covered in corporate finance textbooks or Excel manuals. The objective here is to write a practical book to help users, rather than yet another book on financial mathematics or Excel functions. The first part of the book discusses a design methodology and features for improving the model design. The second part of the book provides templates for solving particular corporate finance problems and includes briefly the underlying theory. As an added bonus, the book includes a CD containing software templates for the models introduced in the book.

Thomas R. Ittelson’s masterwork for entrepreneurs, non-financial managers, business students, lawyers, lenders, and investors―the bestselling book of its kind, with over 200,000 copies in print―has gotten even better with this 20th-anniversary edition.

Ittelson is an expert at translating complicated financial topics in an accessible way for non-financial audiences. In this book, he empowers readers by clearly and simply demonstrating how the three major accounting statements interact to offer a snapshot of a company’s financial health.

This book teaches readers how to use specialized accounting vocabulary and makes accessible the structure and purpose of the three major numeric statements that describe a company’s financial condition. Each statement paints a different and essential picture―the “three-legged stool” of company reporting:

The income statement shows the manufacturing (or service offerings) and selling actions of the company that result in profit or loss during a period. It gives a very important perspective on the company’s performance, its profitability.
• The cash flow statement details cash into and out of the company for a period. You need money to make money. Running out of cash is bad. Duh.
• The balance sheet records at the end of a period, an instant in time, what the company owns and what it owes, including the owners’ stake, called shareholders’ equity.

With two new major topic sections (nonprofit organization accounting and pricing theory for profitability) and spot color reformatting to improve comprehension, this third edition of Financial Statements is simply the clearest and most comprehensive introduction to financial reporting available. No accounting background is required.

Make informed business decisions with the beginner’s guide to financial modeling using Microsoft Excel

Financial Modeling in Excel For Dummies is your comprehensive guide to learning how to create informative, enlightening financial models today. Not a math whiz or an Excel power-user? No problem! All you need is a basic understanding of Excel to start building simple models with practical hands-on exercises and before you know it, you’ll be modeling your way to optimized profits for your business in no time. Excel is powerful, user-friendly, and is most likely already installed on your computer―which is why it has so readily become the most popular financial modeling software. This book shows you how to harness Excel’s capabilities to determine profitability, develop budgetary projections, model depreciation, project costs, value assets, and more. You’ll learn the fundamental best practices and know-how of financial modeling, and how to put them to work for your business and your clients. You’ll learn the tools and techniques that bring insight out of the numbers and make better business decisions based on quantitative evidence. You’ll discover that financial modeling is an invaluable resource for your business, and you’ll wonder why you’ve waited this long to learn how! Companies around the world use financial modeling for decision making, to steer strategy, and to develop solutions. This book walks you through the process with clear, expert guidance that assumes little prior knowledge.

• Learn the six crucial rules to follow when building a successful financial model
• Discover how to review and edit an inherited financial model and align it with your business and financial strategy
• Solve client problems, identify market projections, and develop business strategies based on scenario analysis

Create valuable customized templates models that can become a source of competitive advantage From multinational corporations to the mom-and-pop corner store, there isn’t a business around that wouldn’t benefit from financial modeling. No need to buy expensive specialized software―the tools you need are right there in Excel. Financial Modeling in Excel For Dummies gets you up to speed quickly so you can start reaping the benefits today!

Financial Modelling in Practice: A Concise Guide for Intermediate and Advanced Level is a practical, comprehensive, and in-depth guide to financial modeling designed to cover the modeling issues that are relevant to facilitate the construction of robust and readily understandable models.

Based on the authors extensive experience of building models in business and finance, and of training others how to do so this book starts with a review of Excel functions that are generally most relevant for building intermediate and advanced level models (such as Lookup functions, database, and statistical functions and so on).  It then discusses the principles involved in designing, structuring, and building relevant, accurate, and readily understandable models (including the use of sensitivity analysis techniques) before covering key application areas, such as the modeling of financial statements, cash flow valuation, risk analysis, options, and real options.

A timely update to the global bestselling book on investment banking and valuation – this new edition reflects valuable contributions from Nasdaq and the global law firm Latham & Watkins LLP plus access to the online valuation models and course.

In the constantly evolving world of finance, a solid technical foundation is an essential tool for success. Due to the fast-paced nature of this world, however, no one was able to take the time to properly codify its lifeblood–namely, valuation and dealmaking. Rosenbaum and Pearl originally responded to this need in 2009 by writing the first edition of the book that they wish had existed when they were trying to break into Wall Street.

Investment Banking: Valuation, LBOs, M&A, and IPOs, 3rd Edition is a highly accessible and authoritative book written by investment bankers that explain how to perform the valuation work and financial analysis at the core of Wall Street – comparable companies, precedent transactions, DCF, LBO, M&A analysis…and now IPO analytics and valuation. Using a step-by-step, how-to approach for each methodology, the authors build a chronological knowledge base and define key terms, financial concepts, and processes throughout the book.

The genesis for the original book stemmed from the authors’ personal experiences as students interviewing for investment banking positions. As they both independently went through the rigorous process, they realized that their classroom experiences were a step removed from how valuation and financial analysis were performed in real-world situations. Consequently, they created this book to provide a leg up to those individuals seeking or beginning careers on Wall Street – from students at undergraduate universities and graduate schools to “career changers” looking to break into finance.

Now, over 10 years after the release of the first edition, the book is more relevant and topical than ever. It is used in over 200 universities globally and has become a go-to resource for investment banks, private equity, investment firms, and corporations undertaking M&A transactions, LBOs, IPOs, restructurings, and investment decisions. While the fundamentals haven’t changed, the environment must adapt to changing market developments and conditions. As a result, Rosenbaum and Pearl have updated their widely adopted book accordingly, turning the latest edition of Investment Banking: Valuation, LBOs, M&A, and IPOs into a unique and comprehensive training package, which includes:

• Two new chapters covering IPOs plus insightful contributions from Nasdaq, the leading U.S. exchange and technology provider for IPOs and new listings, and global law firm Latham & Watkins LLP
• Access to six downloadable valuation model templates, including Comparable Companies Analysis, Precedent Transactions Analysis, Discounted Cash Flow Analysis, Leveraged Buyout Analysis, and M&A models
• Six-month access to online Wiley Investment Banking Valuation Course featuring bite-sized lessons, over five hours of video lectures, 100+ practice questions, and other investment banking study tools

Launch your career on Wall Street and hone your financial expertise with Rosenbaum and Pearl’s real-world knowledge and forward-looking guidance in the latest edition of Investment Banking: Valuation, LBOs, M&A, and IPOs.

Written by the Founder and CEO of the prestigious New York School of Finance, this book schools you in the fundamental tools for accurately assessing the soundness of a stock investment. Built around a full-length case study of Wal-Mart, it shows you how to perform an in-depth analysis of that company’s financial standing, walking you through all the steps of developing a sophisticated financial model as done by professional Wall Street analysts. You will construct a full-scale financial model and valuation step-by-step as you page through the book.

When we ran this analysis in January of 2012, we estimated the stock was undervalued. Since the first run of the analysis, the stock has increased 35 percent.  Re-evaluating Wal-Mart 9months later, we will step through the techniques utilized by Wall Street analysts to build models on and properly value business entities.

• Step-by-step financial modeling – taught using downloadable Wall Street models, you will construct the model step by step as you page through the book.
  • Hotkeys and explicit Excel instructions aid even the novice excel modeler.
  • Model built complete with Income Statement, Cash Flow Statement, Balance Sheet, Balance Sheet Balancing Techniques, Depreciation Schedule (complete with accelerating depreciation and deferring taxes), working capital schedule, debt schedule, handling circular references, and automatic debt pay downs.
  • Illustrative concepts including detailing model flow help aid in conceptual understanding.
  • Concepts are reiterated and honed, perfect for a novice yet detailed enough for a professional.
  • Model built directly from Wal-Mart public filings, searching through notes, performing research, and illustrating techniques to formulate projections.
• Includes in-depth coverage of valuation techniques commonly used by Wall Street professionals.
  • Illustrative comparable company analyses – built the right way, direct from historical financials, calculating LTM (Last Twelve Month) data, calendarization, and properly smoothing EBITDA and Net Income.
  • Precedent transactions analysis – detailing how to extract proper metrics from relevant proxy statements
  • Discounted cash flow analysis – simplifying and illustrating how a DCF is utilized, how unlevered free cash flow is derived, and the meaning of weighted average cost of capital (WACC)
  • Step-by-step we will come up with a valuation on Wal-Mart
• Chapter end questions, practice models, additional case studies, and common interview questions (found in the companion website) help solidify the techniques honed in the book; ideal for universities or business students looking to break into the investment banking field.

Backward stochastic differential equations (BSDEs) provide a general mathematical framework for solving pricing and risk management questions of financial derivatives. They are of growing importance for nonlinear pricing problems such as CVA computations that have been developed since the crisis. Although BSDEs are well known to academics, they are less familiar to practitioners in the financial industry. In order to fill this gap, this book revisits financial modeling and computational finance from a BSDE perspective, presenting a unified view of the pricing and hedging theory across all asset classes. It also contains a review of quantitative finance tools, including Fourier techniques, Monte Carlo methods, finite differences, and model calibration schemes. With a view to using in graduate courses in computational finance and financial modeling, corrected problem sets and Matlab sheets have been provided.

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This book is designed to be a working tool for the investment management practitioner, student, and researcher. We cover the process of financial decision-making and its economic foundations. We present financial models and theories, including CAPM, APT, factor models, models of the term structure of interest rates, and optimization method-
ologies. Special emphasis is put on the new mathematical tools that allow a deeper understanding of financial econometrics and financial economics. For example, tools for estimating and representing the tails of the distributions, the analysis of correlation phenomena, and dimensionality reduction through factor analysis and cointegration are recent advances in financial economics that we discuss in depth. Special emphasis has been put on describing concepts and mathematical techniques, leaving aside lengthy demonstrations, which, while the substance of mathematics, are of limited interest to the practitioner and student of financial economics. From the practitioner’s point of view, what is important is to have a firm grasp of the concepts and techniques, which will allow one to interpret the results of simulations and analyses that are now an integral part of finance. There is no prerequisite mathematical knowledge for reading this book: all mathematical concepts used in the book are explained, starting from ordinary calculus and matrix algebra. It is, however, a demanding book given the breadth and depth of concepts covered. Mathematical concepts are in bolded type when they appear for the first time in the book, economic and finance concepts are italicized when they appear for the first time. In writing this book, special attention was given to bridging the gap between the intuition of the practitioner and academic mathematical analysis. Often there are simple compelling reasons for adopting sophisticated concepts and techniques that are obscured by mathematical details; whenever possible, we tried to give the reader an understanding of the reasoning behind these concepts. The book has many examples of how quantitative analysis is used in practice. These examples help the reader appreciate the connection between quantitative analysis and financial decision-making. A distinctive feature of this book is the integration of notions deeply rooted in the practice of investment management with methods based on finance theory and statistical analysis.

Valuation has been the foremost resource for measuring company value for nearly three decades. Now in its seventh edition, this acclaimed volume continues to help financial professionals around the world gain a deep understanding of valuation and help their companies create, manage, and maximize economic value for their shareholders.

This latest edition has been carefully revised and updated throughout and includes new insights on topics such as digital, ESG (environmental, social, and governance), and long-term investing, as well as fresh case studies.

Clear, accessible chapters cover the fundamental principles of value creation, analyzing and forecasting performance, capital structure and dividends, valuing high-growth companies, and much more. The Financial Times calls the book “one of the practitioners’ best guides to valuation.”

This book:

• Provides complete, detailed guidance on every crucial aspect of corporate valuation
• Explains the strategies, techniques, and nuances of valuation every manager needs to know
• Covers both core and advanced valuation techniques and management strategies
• Features/Includes a companion website that covers key issues in valuation, including videos, discussions of trending topics, and real-world valuation examples from the capital markets

For over 90 years, McKinsey & Company has helped corporations and organizations make substantial and lasting improvements in their performance. Through seven editions and 30 years, Valuation: Measuring and Managing the Value of Companies, has served as the definitive reference for finance professionals, including investment bankers, financial analysts, CFOs and corporate managers, venture capitalists, and students and instructors in all areas of finance.

Financial Analysis and Modeling Using Excel and VBA, Second Edition presents a comprehensive approach to analyzing financial problems and developing simple to sophisticated financial models in all major areas of finance using Excel 2007 and VBA (as well as earlier versions of both). This expanded and fully updated guide reviews all the necessary financial theory and concepts, and walks you through a wide range of real-world financial problems and models that you can learn from, use for practice, and easily adapt for work and classroom use. A companion website includes several useful modeling tools and fully working versions of all the models discussed in the book.

• Teaches financial analysis and modeling and illustrates advanced features of Excel and VBA, using a learn-by-doing approach
• Contains detailed coverage of the powerful features of Excel 2007 essential for financial analysis and modeling, such as the Ribbon interface, PivotTables, data analysis, and statistical analysis
• Other titles by Sengupta: Financial Modeling Using C++ and The Only Proven Road to Investment Success
• Designed for self-study, classroom use, and reference

This comprehensive guide is an essential read for anyone who has to perform financial analysis or understand and implement financial models.

Financial Modeling is now the standard text for explaining the implementation of financial models in Excel. This long-awaited fourth edition maintains the “cookbook” features and Excel dependence that have made the previous editions so popular. As in previous editions, basic and advanced models in the areas of corporate finance, portfolio management, options, and bonds are explained with detailed Excel spreadsheets. Sections on technical aspects of Excel and on the use of Visual Basic for Applications (VBA) round out the book to make Financial Modeling a complete guide for the financial modeler.

The new edition of Financial Modeling includes a number of innovations. A new section explains the principles of Monte Carlo methods and their application to portfolio management and exotic option valuation. A new chapter discusses term structure modeling, with special emphasis on the Nelson-Siegel model. The discussion of corporate valuation using pro forma models has been rounded out with the introduction of a new, simple model for corporate valuation based on accounting data and a minimal number of valuation parameters.

The definitive source of information on all topics related to investment valuation tools and techniques.

Valuation is at the heart of any investment decision, whether that decision is to buy, sell or hold. But the pricing of many assets has become a more complex task in modern markets, especially after the recent financial crisis. In order to be successful at this endeavor, you must have a firm understanding of the proper valuation techniques. One valuation book stands out as withstanding the test of time among students of financial markets and investors, Aswath Damodaran’sInvestment Valuation.

Now completely revised and updated to reflect changing market conditions, this third edition comprehensively introduces students and investment professionals to the range of valuation models available and how to choose the right model for any given asset valuation scenario. This edition includes valuation techniques for a whole host of real options, start-up firms, unconventional assets, distressed companies, and private equity, and real estate. All examples have been updated and new material has been added.

• An expansion of ancillaries include updated online databases, spreadsheets, and other educational support tools
• Fully revised to incorporate valuation lessons learned from the last five years, from the market crisis and emerging markets to new types of equity investments
• Revised examples of company valuations such as companies from Eastern Europe and Africa, which stress the global nature of modern valuation
• Author Aswath Damodaran is regarded as one of the best educators and thinkers on the topic of investment valuation

This indispensable guide is a must-read for students wishing to gain a better understanding of investment valuation and its methods. With it, you can take the insights and advice of a recognized authority on the valuation process and immediately put them to work for you.

The essential premise of this book is that theory and practice are equally important in describing financial modeling. In it, the authors try to strike a balance in their discussions between theories that provide foundations for financial models and the institutional details that provide the context for applications of the models. The book presents the financial models of stock and bond options, exotic options, investment-grade and high-yield bonds, convertible bonds, mortgage-backed securities, liabilities of financial institutions–the business model and the corporate model. It also describes the applications of the models to corporate finance. Furthermore, it relates the models to financial statements, risk management for an enterprise, and asset/liability management with illiquid instruments. The financial models are progressively presented from option pricing in the securities markets to firm valuation in corporate finance, following a format to emphasize the three aspects of a model: the set of assumptions, the model specification, and the model applications. Generally, financial modeling books segment the world of finance as “investments,” “financial institutions,” “corporate finance,” and “securities analysis,” and in so doing they rarely emphasize the relationships between the subjects. This unique book successfully ties the thought processes and applications of the financial models together and describes them as one process that provides business solutions. Created as a companion website to the book readers can visit www.thomasho.com to gain a deeper understanding of the book’s financial models. Interested readers can build and test the models described in the book using Excel, and they can submit their models to the site. Readers can also use the site’s forum to discuss the models and can browse server-based models to gain insights into the applications of the models. For those using the book in meetings or class settings, the site provides PowerPoint descriptions of the chapters. Students can use available question banks on the chapters for studying.

The comprehensive, broadly-applicable, real-world guide to financial modeling.

Principles of Financial Modelling – Model Design and Best Practices Using Excel and VBAcovers the full spectrum of financial modeling tools and techniques in order to provide practical skills that are grounded in real-world applications. Based on rigorously-tested materials created for consulting projects and for training courses, this book demonstrates how to plan, design, and build financial models that are flexible, robust, transparent, and highly applicable to a wide range of planning, forecasting, and decision-support contexts. This book integrates theory and practice to provide a high-value resource for anyone wanting to gain a practical understanding of this complex and nuanced topic. Highlights of its content include extensive coverage of:

• Model design and best practices, including the optimization of data structures and layout, maximizing transparency, balancing complexity with flexibility, dealing with circularity, model audit and error-checking
• Sensitivity and scenario analysis, simulation, and optimization
• Data manipulation and analysis
• The use and choice of Excel functions and functionality, including advanced functions and those from all categories, as well as of VBA and its key areas of application within financial modeling

The companion website provides approximately 235 Excel files (screen-clips of most of which are shown in the text), which demonstrate key principles in modeling, as well as providing many examples of the use of Excel functions and VBA macros. These facilitate learning and have a strong emphasis on practical solutions and direct real-world application.

For practical instruction, robust technique and clear presentation, Principles of Financial Modelling is the premier guide to real-world financial modeling from the ground up. It provides clear instruction applicable across sectors, settings, and countries, and is presented in a well-structured and highly-developed format that is accessible to people with different backgrounds.

Financial Modeling for Business Owners and Entrepreneurs: Developing Excel Models to Raise Capital, Increase Cash Flow, Improve Operations, Plan Projects, and Make Decisions may be one of the most important books any entrepreneur or manager in a small or medium-sized enterprise will read. It combines logical business principles and strategies with a step-by-step methodology for planning and modeling a company and solving specific business problems. You’ll learn to create operational and financial models in Excel that describe the workings of your company in quantitative terms and that make it far more likely you will avoid the traps and dead ends many businesses fall into.

Serial entrepreneur and financial expert Tom Y. Sawyer shows how to break your company down into basic functional and operational components that can be modeled. The result is a financial model that, for example, you can literally take to the bank or bring to local angel investors to receive the funding you need to launch your business or a new product. Or it might be a model that shows with startling clarity that your new product development effort is a likely winner—or loser. Even better, you’ll learn to create models that will serve as guideposts for ongoing operations. You’ll always know just where you are financially, and where you need to be. The models you will learn to build in Financial Modeling for Business Owners and Entrepreneurs can be used to:

• Raise capital for a startup or any stage of growth
• Plan projects and new initiatives
• Make astute business decisions, including go/no-go assessments
• Analyze ROI on your product development and marketing expenditures
• Streamline operations, manage budgets, improve efficiency, and reduce costs
• Value the business when it is time to cash out or merge

In addition to many valuable exercises and tips for using Excel to model your business, this book contains a combination of practical advice born of hard-won lessons, advanced strategic thought, and the insightful use of hard skills. With a basic knowledge of Excel assumed, it will help you learn to think like an experienced business person who expects to make money on the products or services offered to the public. You’ll discover that the financial model is a key management tool that, if built correctly, provides invaluable assistance every step of the entrepreneurial journey.

Tom Y. Sawyer has used the principles this book contains to create financial models of numerous startup and early-stage companies, assisting them in planning for and raising the capital that they needed to grow their businesses and ultimately exit with multiples of their initial investment. Financial Modeling for Business Owners and Entrepreneurs, a mini-MBA in entrepreneurship and finance, will show you how you can do the same.

This fully revised edition of Building Financial Models builds on the elements that have made it renowned in the field of financial modeling, including how to develop a sound conceptual understanding of accounting for modeling and how to apply the tools at hand, which are the two key attributes for producing effective and easy-to-use models. A classic in how-to books for designing and building financial models for use in a wide variety of finance roles, this edition includes:

* The latest Microsoft Excel shortcuts, functions, and modeling techniques
* A full chapter on accounting that takes the mystery out of the subject for modeling work
* Expert methods for building models that are easy to understand and superbly fit the task
* New additional materials on valuation analysis and sections on scenarios and sensitivity analysis through the use of Data Tables

Supported by all-new exercise files from the companion website, this comprehensive guide takes you to step by step through the entire process of developing a projection model, starting with a basic pilot model with each chapter introducing additional concepts and features. By the end, you will produce―through your own hands-on participation–a fully functional and dynamic integrated financial statement projection and valuation model. 

With Building Financial Models, Third Edition, you have everything you need to boost your financial modeling expertise.

Capitalize on All the Latest Legal, Financial, and Compliance Information Needed to Analyze and Appraise Any Business.

For over 25 years, Valuing a Business has provided professionals and students with expert business valuation information, offering clear, concise coverage of valuation principles and methods. Over the decades, the book’s unsurpassed explanations of all valuation issues have made it the definitive text in the field, against which every other business valuation book is measured.

Now updated with new legal, financial, and compliance material, the Fifth Edition of Valuing a Business presents detailed answers to virtually all valuation questions_ranging from executive compensation and lost profits analysis…to ESOP issues and valuation discounts.

Written by Shannon Pratt, one of the world’s leading authorities on business valuation, this updated classic offers a complete “one-stop” compendium of information on the full range of valuation concepts and methods. Valuing a Business contains step-by-step discussions and analyses of:

• Business Valuation Standards and Credentials
• Defining the Assignment
• Business Valuation Theory and Principles
• Gathering Company Data
• Site Visits and Interviews
• Researching Economic and Industry Information
• Analyzing Financial Statements
• Financial Statement Ratio Analysis
• Income, Market, and Asset-Based Approaches to Valuation
• The Capitalized Excess Earnings Method
• Premiums and Discounts
• Writing and Reviewing Business Valuation Reports
• Valuing Debt Securities, Preferred Stock, Stock Options, and S Corporation Stock
• Valuations for Estate and Gift Tax Purposes
• Buy-Sell Agreements
• Valuations for Income Tax Purposes
• Valuation with Employee Stock Ownership Plans
• Valuations for Ad Valorem Taxation
• Dissenting Stockholder and Minority Oppression Actions
• Valuations for Marital Dissolution Purposes
• Litigation Support Services
• Expert Testimony
• Arbitration and Mediation

This landmark reference also presents a wealth of recent court cases for each valuation area, which together provides a comprehensive overview of all the legal rulings and trends in the field of business valuation.