Top 10 – Best Financial Modeling Books

Reading a book about financial can offer an additional way to improve skills. We have collected a list of the top 10 books to read to learn more about financial modeling and valuation. Some of the books are read by investment bankers, others by financial professionals, accountants while others are more read by entrepreneurs. Each book offers a new perspective and puts the focus on different topics. Reading one of those books can become a great way to become truly skilled at financial modeling in Excel.

Here is the list of our top 10 best financial modeling books.

1. Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisition

Authors: Joshua Rosenbaum and Joshua Pearl

Written by Joshua Rosenbaum and Joshua Pearl, this book is for advanced readers, already familiar with the finance world or for newbies who like to enter the world of investment banking. It walks you through the Investment Banking process step by step and covers all the relevant topics such as financial modeling for valuation, leveraged buyouts, and mergers & acquisition. Each chapter starts with an overview of the methodology, key concepts and then thoroughly looks at the practical aspects of building the actual models. The authors also will walk you through how they setup their spreadsheets and to configure Excel to perform the analysis more easily. One can feel that the authors try to simplify the relevant financial concepts where other books explain the topics in more complex ways. Its an investment bank book using a very pragmatic “nuts and bolts” approach. It offers an excellent basis to learn more about valuation and financial modeling. 

2.Measuring and Managing the Value of Companies

Authors: Tim Koller, Marc Goedhart and David Wessels

This is the classic valuation book from the cuisine of McKinsey & Company. The main difference to other books is that the analysis focuses on the concept of Economic Value Add, which is the surplus value a company should generate by comparing to its cost of capital.

This book is for somebody who aims for precision in valuation and looks for theoretical solid methodologies. It’s less a practitioners book for small business valuations (which in most cases require more a pragmatic approach to valuation) but more for stock investors as it helps them to figure out if a company performs the way it should or if it destroys value. It gives you a solid understanding of the valuation process as well as the drivers of business value. Its one of the best reads if you seek to understand valuation in more detail and read by many investment bankers, valuation experts, and financial consultants.

3. Investment Valuation: Tools and Techniques for Determining the Value of any Asset

Author: Aswath Damodaran

A comprehensive, practical and relevant resource on investment valuation

This book, ‘Investment Valuation’, forged in years of financial expertise tested and reaffirmed at his many packed conferences presents investment valuation techniques in his signature clarity and gusto. For professionals and students looking to consistently score big in the investment business, the book is armed with a plethora of models on investment valuation and detailed guidance on selecting the most effective valuation model for a specific asset valuation situation. In the book, the author covers every aspect of asset valuation scenarios including: start-ups, unconventional assets, distressed companies, private equities, and real estate.

For professionals interested in utilizing value enhancement, such as the CFROI and probabilistic valuation techniques, such as the decision tree and Monte Carlo techniques, ‘Investment Valuation’ provides an excellent resource. The book provides a solid reference text with detailed treatment of ‘intrinsic’ valuation techniques, such as the EVA and DCF, as well as ‘relative’: P/E and EV/EBITDA valuation multiples approach. If you are seriously thinking about improving and solidifying your investment valuation skills for any serious project, then the book, ‘Investment Valuation’ has everything you need in one detailed resource.

4. Financial Modeling by Simon Benninga

Author: Simon Benninga

An Innovative and Comprehensive Guide to Financial Modeling with Excel

This quantitative finance book is immediately distinguished by its cookbook style writing of that that is seasoned by Simon Benninga, a financial master chef, to guide the reader through a pedagogical sequence for learning financial modeling by doing it. The book is generously garnished with comprehensive resources on the implementation and analysis of financial models using Excel. ‘Financial Modeling’ by Simon Benninga presents relevant topics on the implementation of basic to advanced financial modeling, options and bonds, portfolio management and corporate finance with detailed Excel spreadsheet examples. It provides a magical walk through these technicalities in a clear and concise language suitable for financial professionals, and as a standard instructional material.

As one of the best resource materials for a coal-face hard-core understanding of the tools and techniques employed in a sophisticated way of performing financial analysis, the book is cast with an abundance of innovative techniques for corporate valuation based on accounting data that requires minimal valuation variables. Every reader starving for a buffet of practical, easy-to-follow, innovative and thorough methods in one quantitative finance book, should try out this one.

5. Financial Modeling for Business Owners and Entrepreneurs

Author: Tom Y. Sawyer

A comprehensive and indispensable guide to developing business models for entrepreneurs

In the book, ‘Financial Modeling for Business Owners and Entrepreneurs’, Tom Y. Sawyer takes out all the complexities in developing tailored financial models for small and medium-sized businesses using the Excel application. The detailed book blends intuitive business principles with systematic techniques for planning and modeling businesses using Excel, with the aim of solving specific business problems. It is skillfully crafted as a practical guide for business owners and entrepreneurs to analyze their entire business into operational and functional components that can be quantitatively modeled in the clearest and direct manner.

From getting the right funds to carving out guidelines for businesses operations to new product development, the book knits a fine canvas for entrepreneurs to map out the current and eventual success of any business with outstanding conciseness and accuracy using Excel. If you are seriously considering firing up or growing a business with the right knowledge and vision, then this book is your ignition.

6. Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity

Author: Paul Pignataro

A step-by-step guide on developing financial models for evaluating stock investments

In this book, ‘Financial Modeling and Valuation’, Paul Pignataro packs an easy to follow, comprehensive and practical resource for financial modeling aimed at the valuation of stock investments. The book is distinguished by its easy to follow and highly organized structure as well as content, that permits readers irrespective of their proficiency in accounting, finance, or modeling with Excel, to attain a mastery of financial modeling tailored towards investment banking and private equity. The book is a true ice-breaker for non-financial professionals with little foundational knowledge of accounting principles hoping to perform full-scale valuation exercises of companies for investing in stock and private equities.

The book demystifies the most sophisticated financial models to non-financial in-depth insights and step-by-step guides into the use of cash flow statements, balance sheets, depreciation schedules, handling circular references, and automatic debt pay downs. Armed with rich insights into Comparable Company Analyses, Precedent Transactions Analyses, and Discounted Cash Flow Analysis, anyone can dominate Wall Street with this book. With this astonishing book, financial modeling for stock investment and private equities is no longer a wolf’s game, as just about anyone can do it as it is done on Wall Street, with the barest accounting or Excel modeling proficiencies.

7. Building Financial Models

Author: John Tjia

A practical guide on developing and interpreting financial models and projections

In this book, ‘Building Financial Models’, the author shows a unique pioneering perspective, formed from decades of on-going involvement in developing financial models for prominent financial institutions right from the mainframe days. The book is a loaded as a direct and comprehensive guide on developing integrated financial models and projections, enriched with in-depth insights into the full range of operational and financial parameters that are fused into financial statement projection models. The book pays close attention to developing an in-depth insight into discounted cash flow (DCF) modeling.

As an excellent and adventurous excursion into the world of financial modeling, the book is keen to provide an explicit and definitive 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. As a pioneering resource in the area of financial modeling, the book doesn’t assume that readers might have even the slightest knowledge of financial modeling using Excel. This makes the book a highly detailed and comprehensive resource for financial modeling for any level of expertise. Any reader that would like to leave no stones unturned in the area of financial modeling would find this book to be indispensable.

8. Principles of Financial Modeling

Author: Michael Rees

A comprehensive and applicable guide to financial modeling principles and best practices

A financial professional seeking to develop an understanding of tools and techniques for financial models applicable to the realities of the prevalent business settings would find this book to be invaluable. In the book, ‘Principles of Financial Modeling’, Michael Rees walks the reader step-by-step through a full spectrum of effective tools and techniques that can be applied for developing financial models in the prevalent realities of the business world. The book develops a comprehensive guide for building flexible and fully dynamic financial models that are tailored to a broad array of business decision-making situations. It is crafted from an abundance of tested resources for financial training and consultancy.

The book combines financial modeling principles with industry best practices with emphasis on data structure and layout optimization, financial transparency, balance, managing circularity, and financial model audition. The books also cover a broad range of financial modeling principles in sensitivity and scenario analysis, data analysis and the application of Excel and Visual Basics for Application (VBA) functionalities in financial modeling. ‘Principles of Financial Modeling by Michael Rees’ is an indispensable material for any professional seeking to get an extensive and in-depth knowledge of financial modeling for diverse real-world applications.

9.Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports

Author: Thomas Ittelson

Non-financial business owners and managers would agree that financial reporting and accounting are crucial business tools that must not remain the exclusive right of accountants and finance professionals. In the book, ‘Financial Statements’, Thomas Ittelson’ demystifies the world of financial accounting and reporting in a fashion that is within the grasp of non-financial managers, small and medium enterprise entrepreneurs, legal practitioners, and MBA students. It provides a step-by-step walk through the creation and interpretation of financial reports that are useful and relevant to financial professionals, as well as non-financial professionals.

In the book, ‘Financial Statements’, a comprehensive and simplified explanation is provided for the techniques, tools, and concepts by which financial reports in the form of balance sheets and cash flow statements can be combined to provide an in-depth and effective assessment of the financial situation of a business enterprise. The book helps non-financial experts wrap their heads around financial accounting without oversimplifying the financial concept to an extent that they become inaccurate expressions of the reality (an identified hurdle in several other introductory accounting books). The book is a must-read for non-financial business-inclined individuals.

10.Valuing a Business: The Analysis and Appraisal of Closely Held Companies

Authors: Shannon P. Pratt and Alina V. Niculita

This books focuses on the valuation of non-public companies and provides tons of examples as well as step by step processes. The main benefit of this book is that it reviews the various valuation techniques and the reasons when to apply them. This book is quite useful for general business people, not just accountants and lawyers.