It’s whether it’s a new car, a new home or even a whole business The majority of people want know all the good and negative aspects of whatever they are investing their time, money or energy on. They want to be sure they’re making the best decision and don’t get caught by unexpected surprises later. That’s why they conduct due diligence, a procedure which examines a purchase investment to determine the risk.
Due diligence can be classified into various types which include commercial, financial and environmental, as well as intellectual property. The areas to be examined are contingent on the type due diligence but include licenses, loans and contracts, employment issues, property issues, regulatory issues, and any litigation pending.
Financial due diligence is the process of confirming and assessing underlying financial data, such as earnings and profits in addition to liabilities and assets cash flow, and debt. This includes analysis of ratios, using financial tools and sizing up a business to create projections of future performance.
Commercial due diligence is a method that focuses on a company’s marketplace and competition. It can be used to determine if the business will be profitable over time. It can also reveal potential synergies and growth through a possible merger or acquisition.
