This checklist is designed to ensure that all necessary financial information and assessments are completed before a major financial transaction or investment decision is made. It provides a systematic approach to evaluate financial health and identify potential risks.
Collect the most recent financial statements, including balance sheets, income statements, and cash flow statements for the last three years.
Calculate and analyze key financial ratios such as liquidity ratios, profitability ratios, and solvency ratios to assess the financial health of the entity.
Identify and evaluate the different sources of revenue, including trends and sustainability to understand the business model.
Ensure that the entity is compliant with tax obligations and review any potential tax liabilities or pending issues.
Review all outstanding debts, loans, and other financial obligations to assess the financial risk.
Conduct an analysis of the market conditions and competitors to understand the external factors impacting the business.
Look for any potential future liabilities that may arise from lawsuits, warranties, or other obligations.
Assess the effectiveness of internal controls and compliance procedures to mitigate risks of fraud and financial misreporting.
Prepare a comprehensive report summarizing findings, potential risks, and recommendations for stakeholders.