Financial Due Diligence Checklist ( FINANCE )

This checklist is designed to ensure that all necessary steps are taken during the financial due diligence process, which is crucial for mergers, acquisitions, or any significant financial transactions. It helps in assessing the financial health of a company before making investment decisions.

• Review Financial Statements

  Examine the target company's financial statements for the last three to five years to assess revenue trends, profitability, and cash flow.

• Analyze Tax Returns

  Collect and evaluate tax returns for the past three years to identify any tax liabilities or exposures that may affect the transaction.

• Evaluate Accounts Receivable

  Assess the aging of accounts receivable to determine the collectability and potential risks associated with outstanding debts.

• Examine Accounts Payable

  Review accounts payable to identify any outstanding liabilities and ensure there are no hidden obligations.

• Assess Inventory Valuation

  Conduct a physical count and valuation of inventory to ensure accurate representation on the balance sheet.

• Review Debt Obligations

  Examine all debt agreements to understand terms, conditions, and any potential impacts on cash flow and operations.

• Evaluate Employee Contracts

  Review employment agreements and contracts to assess any contingent liabilities related to employee compensation or benefits.

• Check Compliance with Regulations

  Ensure that the company complies with all financial regulations and standards to avoid future legal or financial issues.

• Analyze Revenue Recognition Policies

  Investigate the company’s revenue recognition policies to ensure they align with accounting standards and accurately reflect performance.

• Conduct a Risk Assessment

  Identify any financial risks associated with the company’s operations, including market, credit, and operational risks.