Financial Due Diligence (FDD) is a process that involves thoroughly reviewing the financial information of a company to assess its overall financial health and identify any potential risks or issues. FDD is commonly used in mergers and acquisitions, but it can also be used in other situations such as investment decisions, or loan applications.

One of the key aspects of FDD is the review of financial statements. This includes reviewing the company’s balance sheet, income statement, cash flow statement, and other financial statements to assess its overall financial health. Financial Due Diligence consultants should be able to identify any red flags or potential issues in the financial statements, such as inconsistencies, irregularities, or significant fluctuations.

Another aspect of FDD is the assessment of financial ratios. Financial ratios are used to evaluate various aspects of a company’s financial performance, such as liquidity, profitability, and solvency. Financial Due Diligence consultants should be able to calculate and interpret financial ratios to assess the company’s overall financial health. FDD also includes assessing the company’s cash flow and working capital. The cash flow statement provides information about a company’s cash inflow and outflow, and working capital is the difference between a company’s current assets and current liabilities.

Another important aspect of FDD is assessing the company’s financial projections. Financial projections are estimates of a company’s future financial performance, and they are often used to assess the company’s potential for growth and profitability. FDD also includes assessing the company’s financial risks. This includes identifying and assessing the company’s exposure to financial risks such as currency risk, interest rate risk, and credit risk.

Our scope of services covered under Financial Due Diligence (FDD) may vary depending on the specific requirements of the client and the purpose of the FDD. However, in general, the services covered under FDD include:

1. Review of financial statements: This includes reviewing the company’s balance sheet, income statement, cash flow statement, and other financial statements to assess its overall financial health and identify any red flags or potential issues.
2. Assessment of financial ratios: This includes calculating and interpreting financial ratios such as liquidity ratios, profitability ratios, and solvency ratios to assess the company’s overall financial health.
3. Cash flow and working capital analysis: This includes assessing the company’s cash flow and working capital to identify any potential issues or risks.
4. Assessment of financial projections: This includes assessing the company’s financial projections to identify any potential issues or risks and evaluate the company’s potential for growth and profitability.
5. Identification and assessment of financial risks: This includes identifying and assessing the company’s exposure to financial risks such as currency risk, interest rate risk, and credit risk.
6. Review of contracts and agreements: This includes reviewing key contracts and agreements to identify any potential risks or liabilities.
7. Review of legal and regulatory compliance: This includes reviewing the company’s compliance with relevant laws and regulations to identify any potential issues or risks.
8. Review of internal controls and systems: This includes reviewing the company’s internal controls.