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> financial due diligence
financial due diligence
Introduction and Background
Overview of the business and its operations
Business structure (e.g., corporation, partnership, sole proprietorship)
Shareholder or ownership structure
Purpose and scope of the due diligence review
Key stakeholders involved in the review process
Relevant documents requested and provided by the target company
Historical financial performance of the company
Market analysis and competitive landscape
Customer base and key accounts
Overview of key products and services
Regulatory environment and compliance status
IT infrastructure and cyber security measures
Intellectual property rights and licenses
Insurance policies and coverage
Use of debt and availability of additional financing
Environmental and sustainability practices
Financial Statements and Accounting
Audited financial statements for the past three to five years
Management accounts and budgets
Detailed breakdown of revenue and expenses
Any special purpose financial statements
Accounting policies and practices
Review of financial ratios
Analysis of working capital
Evaluation of tax assets and liabilities
Review of debt structures and repayment plans
Detailed cash flow analysis
Review of capital expenditures and investments
Evaluation of off-balance sheet items
Assessment of long-term financial projections
Analysis of any contingencies or commitments
Investigation of any financial irregularities or irregularities in financial statements
Comparison of financial performance to competitors
Assets and Liabilities
Fixed assets register, including details of depreciation and capital expenditures
Review of intangible assets (e.g., patents, trademarks)
Inventory valuation and management
Debtors and accounts receivable
Creditors and accounts payable
Loans and borrowings
Contingent liabilities (e.g., pending litigation, warranties)
Review of capital structure
Review of financial covenants
Review of any security arrangements in place
Review of any guarantees given or taken
Analysis of balance sheet trends
Review of off-balance sheet items (e.g., related party transactions)
Analysis of liquidity ratios
Analysis of leverage ratios
Analysis of asset utilization ratios
Analysis of debt service coverage ratios
Review of any related party transactions
Review of any guarantees given or taken
Review of any security arrangements in place
Review of insurance policies and coverage
Review of inter-company and intra-company balances
Tax and Legal Matters
Review of tax returns for the past three to five years
Tax assessments and disputes
Compliance with tax laws and regulations
Employment contracts and agreements
Legal claims or litigation
Intellectual property rights
Regulatory compliance (e.g., licenses, permits)
Review of existing contracts, agreements, and leases
Analysis of changes in tax laws and regulations
Analysis of potential tax credits and deductions
Analysis of potential tax liabilities
Analysis of tax implications of asset purchases and disposals
Review of corporate governance documents
Review of international tax compliance requirements
Review of withholding tax requirements
Review of transfer pricing policies
Review of relevant tax treaties
Review of financial transactions for potential tax avoidance
Review of payroll tax compliance
Review of corporate structure for tax efficiency
Contracts and Agreements
Review of major contracts (e.g., customer, supplier, lease agreements)
Analysis of key terms and conditions
Change of control provisions
Non-disclosure and non-compete agreements
Partnership or joint venture agreements
Intellectual property licenses
Guarantees and indemnifications
Assignment and delegation agreements
Bank and financing agreements
Settlement and litigation agreements
Performance and service level agreements
Regulatory and industry compliance agreements
Employee and Human Resources
Details of employee contracts and compensation
Employee benefits and pension plans
Labor disputes or pending legal actions
Compliance with employment laws and regulations
Employee turnover rates and key personnel
Review of employee handbook and policies
Performance feedback and reviews
Analysis of hiring practices
Employee morale and engagement survey results
Training and development programs
Employee recognition programs
Review of employee onboarding process
Risks and Opportunities
Identification of potential risks and mitigating factors
Assessment of market and industry risks
Evaluation of growth opportunities
Analysis of competitive landscape
Review of business strategy and future projections
Identification of financial and non-financial risks
Review of insurance coverage
Analysis of capital structure
Review of current and potential customer base
Evaluation of operational efficiency and cost structure
Assessment of key performance indicators
Investigation of reputational risks
Analysis of technology and innovation
Assessment of environmental and social impacts
Other Considerations
Insurance policies and coverage
IT systems and infrastructure
Environmental and sustainability matters
Intellectual property protection and infringement risks
Insurance and risk management
Government regulations and compliance
Data security and privacy policies
Customer and vendor relationships
Real estate and property holdings
Litigation and other legal matters
Cyber security protocols
Business continuity and disaster recovery plans
Branding and marketing strategies
Regulatory filings and reporting requirements
Licensing and permits
External audit reports
Compliance with industry standards
Conclusion and Recommendations
Summary of findings and key issues
Recommendations for further actions or investigations
Overall assessment of the business's financial health and viability
Examine the potential impact of any financial issues on the business
Consider the financial stability of the company going forward
Review the results of the financial analysis with management
Make any necessary adjustments to the financial statements
Recommend strategies to increase profitability and reduce costs
Discuss the timeline for implementing any necessary changes
Establish a plan for monitoring the financial performance of the company
Develop scenarios to help manage and reduce financial risks
Identify areas where additional resources or expertise may be needed
Assess the ability of the business to meet its short-term and long-term financial goals
Recommend methods to improve the accuracy and reliability of the financial data
Provide recommendations for improving financial reporting processes
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