"Financial due diligence provides peace of mind to both corporate and financial buyers by analysing and validating all the financial, commercial, operational and strategic assumptions being made." Give your views on the

Financial Due Diligence: Financial Due Diligence is the process of analyzing requiring inquiry, analysis and interpretation of financial and operational data to assist a buyer in assessing certain risks and opportunities involved in a potential transaction. It seeks to check whether the financials showcased in the Information Memorandum is correct or not. It also provides a deep understanding of all the: Company's financials, including but not restricted to audited financial statements for last three years, recent unaudited financial statements with comparable statements of last year, review of accounting policies, review of internal audit procedures, quality and sustainability of earnings and cash flow, condition and value of assets, potential liabilities, tax implications of deal structures, examination of information systems to establish the reliability of financial information, internal control systems etc. The Financial Due diligence also review the company's projection and basis of such projections, capital expenditure plan, schedule of inventory, debtors and creditors, etc. Also, the process involves analysis of major top customer accounts, fixed and variable cost analysis, analysis on gross margins, customers with high profit margins and their contract period, internal control procedures etc. It will also involve the type of the company's order book and sales pipeline to better build projections. The Financial Due Diligence can further extends to tax due diligence which covers the Diligence on various taxes the company is required to pay and which ensure that the proper calculation with no intention of under-reporting of taxes. Status of any tax related case running with the tax authorities. COMPONENTS OF FINANCIAL DUE DILIGENCE: Sustainable / normalised earnings Sales trends – by segment product geographies diligence Sales trends – by segment, product, geographies Customer / product profitability Overheads - fixed vs. variable Balance sheet - fixed assets, borrowings, working capital Unrecorded liabilities Commitments, contingencies Accounting policies Management BOD control environment Corp Governance Relationship between profit and operating cash flows Reliance on debt funds and usage of debt Debt repayment and potential debt trap Working capital lock up