Different Types of Due Diligence

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Many people want to know the pros and cons of whatever they invest time or money on whether it’s a new car, home, or a whole company. They want to ensure they’re making the right decision and won’t be astonished by unpleasant surprises later on. This is why they conduct due diligence, which is a process that examines a purchase or investment to determine the risk.

Due diligence can be classified into a variety of types which include commercial, financial and environmental, as well intellectual property. The areas to be examined are contingent on the type due diligence but include licenses, loans and contracts, employment issues, regulatory concerns, property, and any litigation pending.

Financial due diligence is about investigating and assessing the core financial data of a company, such as earnings, profits, assets, cash flow, liabilities and debt. It also involves analysis of ratios and using a variety of financial tools to size up a company and make projections about future performance.

Commercial due diligence is a process that examines a company’s market and its competitors. It can be used to determine if the business is profitable over time. It also helps identify potential synergies and growth through a possible merger or acquisition.