Building Financial Models

John Tjia’s involvement with the first financial projection model on a mainframe several decades ago and his ongoing work building models for prominent financial sector firms gives him a unique perspective. His book provides straightforward steps for creating integrated financial statement projection models and helpful explanations of the related operating, investing and financial variables that projections are based upon. As with any good introductory text there are plenty of definitions for new terms/concepts such as: one-off model versus template model; integrated financial statement projection model; iteration; the revolver and circular references. Emphasis is also placed upon streamlining the modeling process by determining whether the model under consideration will be: an annual or quarterly model; full-blown or quick & dirty model and what questions will it answer.A “best practices” chapter lists common sense refinements that make spreadsheets more readable such as color coding input cells and having one location for all input values that are referenced throughout the model using absolute and mixed cell addresses. At the midpoint of the book a simple model is introduced, the five subsequent chapters each add a layer of complexity to that model. The book ends with two chapters that introduce Visual Basic in a thorough yet interesting manner.Please note that since the first edition of Tjia’s book predates other Financial Modeling textbooks, he makes no assumptions about his readers having any background in financial modeling and explains everything in great detail. Hence the acquisition of Tjia’s book will significantly enhance your arsenal of financial modeling reference materials.

Although I have been modeling for over three decades, I had failed to keep up with the evolution of financial modeling standards and so ordered Mr. Tjia's book to bring me up to date. (The book is listed as a recommended reading for the Advanced Financial Modeler Level I exam.) I found Mr. Tjia's approach to financial modeling to be systematic and complete. It provides a comprehensive framework that encourages (or requires) the modeler to consider all of the key aspects of a company's financial reporting practices. In doing so, the modeler will also discover both the strengths and weaknesses of a company's financial reporting practices. It also provides practical tips on the use of Excel. I have only a couple of complaints about the book. First, it contains too many typographical errors for a book now in its second (and soon to be its third) printing. More importantly, Mr. Tjia attempts to serve financial modeling neophytes by offering, for example, grossly simplified explanations of key financial ratios and metrics. I, for one, would have preferred to see him tackle more advanced topics, such as how to calculate the differences between book and taxable income to get the change in deferred taxes and advanced scenario planning.

The second edition is an outstanding primer on building models. The book is both for college students and senior finance professionals with or without excel experience. The book does a great job of explaining excel functions and how to use excel. The book guides you through building a model which can balance through both the balance sheet and or the statement of cash flow, which is fantastic and no other modeling book does. The photo shots of the excell sheets and the formulas used is a huge help in seeing the big picture. The author does a superb job of explaining the cash and debt sweep scenarios ( a most complicated excel topic) and lays it out in a manner that is easy to understand. This is a must have book for every person that is learning to build models.

I purchased this book to help me review some key financial modeling topics. The author does a great job of explaining several different methodologies for using plugs with financial statements. In addition, the author presents several nice methods for dealing with the dreaded interest-debt circular reference issue that is common in many banker models. One of the nicest thing is the author utilizes a few example spreadsheets that are further developed throughout the book by adding more complex logic. I would definitely recommend purchasing this book to add to your finance reference book library for work.

It's a good book for people who have very little knowledge on financial modelling. Not so for people looking for more advance materials.

This is a well thought and structured book that takes you step by step through the process of financial modeling. If you want to understand how financial statements are linked, this is a great book. This type of teaching isn't easily available out there and anyone who is starting in this field should definitely consider it.Although I could have missed the following instruction in the reading, the author should advice readers to do all the Excel work from scratch in order to get the most from this book. The author uploaded the Excel work for anyone to see and download, which could mislead folks to underestimate the intricacies about building a model on their own.

This is a well written book, that takes and guides you gently through the intricacies of building financial models. It demonstrates practical examples and allows you to practice with live examples. Recommended reading for all investment bankers.

I ordered and used the book to complete an online certification course in financial modeling. I passed, so I am now a Certified Financial Modeling Specialist. Well written.