Due Diligence

Due diligence is the process of thoroughly investigating and evaluating a company, investment, or financial transaction before making a decision. It involves examining financial statements, business operations, market conditions, legal aspects, and risks to ensure that all relevant information is considered. Due diligence is essential for investors, companies, and financial professionals to make informed decisions and avoid unnecessary risks. The due diligence process can vary depending on the complexity of the transaction but is a critical step in mergers, acquisitions, and investments to verify the accuracy of claims and assess potential risks.

Example

Before acquiring a company, an investor performs due diligence by reviewing its financial records, legal obligations, and competitive position in the market.