Financial Due Diligence

Due diligence is the process of investigating a company or project to give investors the information they need to make an informed decision. In short, it’s the process of getting all the facts. Financial due diligence is the process of researching a company’s financials, accounting policies, and other factors that could affect its business and investment risk.
While due diligence is necessary for all investors, it’s particularly important for sophisticated ones. These are the people who will be applying the most resources to the investment and who will have the most at stake should the investment go south. For those investors, understanding what due diligence is, why it’s important, and how to do it well is critical.
The goal of financial due diligence is to uncover any potential issues with the company’s finances and operations — and to correct them if possible. Financial due diligence is different from operational due diligence, which looks at the company’s management and how it runs its day-to-day operations.