What is Due diligence?
Due diligence: Careful checking of a deal before committing.
Where Due diligence fits
Due diligence is part of Valuation & Deals in Finance. Valuation estimates what a business is worth. Mergers and acquisitions are checked by due diligence, and present value converts future cash into today's money.
Practical tip
Never pay more than discounted future cash, and verify claims before signing.
Related terms
- Merger
- Two companies join to form a single new one.
- Acquisition
- One company buys control of another.
- Goodwill
- Extra value paid in an acquisition above the worth of identifiable assets.
Formulas you will use with it
Test yourself
Which term means: “Careful checking of a deal before committing.”?
Merger · Due diligence · Goodwill
Answer: Due diligence
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