It lets the seller identify potential issues early, clarify value-bridge items such as net debt and working capital, and speed up the process. Buyers usually carry out a narrower review of their own in addition.
Related terms
Financial due diligenceA detailed review of the target company's financial position, profitability, indebtedness and risks before an acquisition or investment.Quality of earnings analysisEstablishing a company's sustainable profitability by stripping unusual, non-recurring and non-operating items out of reported profit.Mergers and acquisitions (M&A)The general term for mergers of companies and for one company acquiring or disposing of another company or business line.BetaA coefficient measuring the sensitivity of a share's return to changes in the market return, that is, its systematic risk.Break-even pointThe sales volume or amount at which total revenue equals total cost and the business makes neither profit nor loss.Capital asset pricing model (CAPM)A model that calculates the cost of equity from the risk-free rate, beta and the market risk premium.
Last updated: October 31, 2026 · This definition is for general information only.