Question

What do you mean by due diligence? What factors are considered in carrying out the process of due diligence effectively?

Answer 1

Due diligence meant as an Analysis of a proposed investment or product to confirm all facts. Investment products may be stock of other securities or any proposed project. In the process of due diligence experts analyze all relevant facts and financial information and confirm whether there are any major issues involved or not. For example in mergers and acquisitions (M&A), investing in business without doing due diligence may increase the risk to the purchaser.

Factor considered in the process of Due diligence:

1. Why is the company offering for investment or selling their project?

2. Have earlier any offer made by the company or not.

3. Long -term strategic planning of the company

4. Quality of Companies product or other intellectual property.

5. Capital Structure or solvency position of the company

6. Financial Statements of the company and Auditor report.

7. Status of firm’s Profitability and liquidity position in the history

8. Efficiency of management and their policies.