A. When performing financial due diligence, the information requested will vary depending on the specific circumstances of the transaction, the nature of the business, and the specific areas of concern. However, some of the most common financial information that is requested during due diligence includes:
1. Financial statements: This includes balance sheets, income statements, cash flow statements, and other financial reports and analyses. This information is used to evaluate the company’s financial performance, stability, and potential for growth.
2. Financial projections: This includes financial projections, such as pro forma income statements, balance sheets, and cash flow statements. These projections are used to evaluate the company’s future performance and potential for growth.
3. Tax returns: This includes copies of the company’s federal and state income tax returns, as well as any schedules or forms that are filed with the returns. This information is used to evaluate the company’s tax history and potential tax liabilities.
4. Banking and other financial information: This includes information on the company’s bank accounts, loans, and other financial arrangements. It also includes information on the company’s creditworthiness, credit history and credit scores.
5. Other financial information: This includes information on the company’s fixed assets, such as property, plant, and equipment, as well as information on the company’s inventory and accounts receivable.
6. Budget, forecasting and strategic plans: This includes information on the company’s budgets, forecasting, and strategic plans. This information is used to evaluate the company’s financial planning and forecasting processes, and to understand the company’s future growth plans and objectives.
7. Audited financial statements: This includes audited financial statements, which are reviewed and verified by an independent auditor. This information is used to provide a level of assurance that the financial information is accurate and reliable, and to ensure that the company’s financial statements are presented fairly in all material respects.
8. Financial ratios and key performance indicators (KPIs) : These include liquidity ratios, profitability ratios, solvency ratios, efficiency ratios and other industry-specific ratios and KPIs. This information is used to evaluate the company’s financial performance and to identify any potential issues or areas for improvement.
9. Subsidiary, affiliate and joint venture financial information: If the company has any subsidiaries, affiliates or joint ventures, their financial information would be requested.
10. Off-balance sheet items: This includes information on any off-balance sheet items, such as lease obligations, guarantees, and other commitments, which may have a significant impact on the company’s financial position and liquidity.
