Free Financial Due Diligence Checklist Template

Financial Due Diligence Checklist

Prepared by: [YOUR NAME]

This Financial Due Diligence Checklist is designed to help [YOUR COMPANY NAME] guide you through the essential steps in evaluating the financial health of a potential investment or business acquisition. Use this checklist to systematically review key financial documents and identify any potential risks.

Financial Statements

  • Review of the last 3-5 years of audited or unaudited financial statements.

  • Verify the accuracy of income statements, balance sheets, and cash flow reports.

  • Assess profitability, revenue trends, and any unusual fluctuations or discrepancies.

Tax Returns

  • Obtain and analyze federal, state, and local tax returns for the last 3 years.

  • Review any tax liabilities, carryforwards, or tax audit issues.

  • Ensure the company has been filing taxes accurately and on time.

Liabilities and Debts

  • Assess any outstanding debts, including loans, leases, credit lines, and obligations to suppliers or creditors.

  • Review debt covenants, interest rates, repayment terms, and maturity dates.

  • Check for any legal disputes related to debts or potential defaults.

Revenue and Expenses

  • Examine key revenue sources and major expense categories.

  • Evaluate revenue recognition policies and any potential risks.

  • Look for trends in cost management, operational efficiency, and profitability.

Assets and Inventory

  • Verify asset ownership, including real estate, equipment, and intellectual property.

  • Ensure inventory is properly valued and accounted for.

  • Review any asset impairments, write-offs, or pending sales.

Compliance and Legal Matters

  • Ensure all financial practices comply with local, state, and federal laws.

  • Review any past or pending legal issues, lawsuits, or regulatory investigations.

  • Assess environmental, health, and safety compliance as it relates to financial risk.

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