Financial due diligence, also known as prudential investigation, generally means that after the investor reaches a preliminary cooperation intention with the target company and reaches an agreement through consultation, the investor conducts on-site inspection of all matters related to the investment of the target company. A series of activities of investigation and data analysis. It is mainly carried out during capital operation activities such as acquisitions (investments), but when a company is listed, due diligence will also be conducted in advance to initially understand whether it meets the conditions for listing.

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The main work of financial due diligence

1) Business: the business model and profit model of the industry/enterprise; the competitive advantages of the target enterprise; synergy effects, and potential future costs and risks.

2) Finance: The authenticity and reliability of historical data; are the forecasted financial data conservative? Optimistic? What is the basis for the prediction? Are there any off-balance sheet liabilities? The soundness of the internal control system; tax issues.