Financial due diligence includes analyses of quality of earnings, working capital, net debt, capital expenditure and related party transactions. Findings feed into price negotiations and the indemnity and warranty provisions of the contract. Vendor due diligence commissioned by the seller speeds up the sale process.
Related terms
Quality of earnings analysisEstablishing a company's sustainable profitability by stripping unusual, non-recurring and non-operating items out of reported profit.Net debtFinancial debt and similar liabilities less cash and cash equivalents.Working capitalThe difference between current assets and current liabilities; in practice usually used as net working capital, consisting mainly of trade receivables, inventories and trade payables.Share purchase agreement (SPA)The agreement governing the price, payment terms, representations and warranties, indemnities and closing conditions in a share transfer.Completion accountsFinancial statements prepared as at the closing date of an acquisition, through which the final price is set by net debt and working capital adjustments.Cost of capitalThe minimum rate of return investors expect from an investment in return for the risk they take.
Last updated: October 22, 2026 · This definition is for general information only.