Due Diligence: the Balance Sheet

An important part of any Due Diligence is the examination of a company’s financial statements. The following will take a closer look at some of the elements that one ought to pay particular attention to in regards to the Balance Sheet.

Depending on whether the project has a single company or a group of companies, looking at the consolidated balance sheet provides the best opportunity to view the overall level of assets and liabilities, as well as the company’s ability to pay off short-term debt (cash levels). Additionally, the long-term debt must be examined in order to observe the company’s entire payment responsibilities.

The debt-to-equity ratio calculation provides the measure of financial leverage of the company and indicates the proportion of equity and debt being used to finance its assets.

One of the important aspects to inspect is how the assets, liabilities and stockholder’s equity change (if at all) from year to year. In cases where there are substantial differences here, whether an increase or decrease,  the Client should be able to explain such and any consequences that may affect the project going forward.

Lastly, the “Notes” section of the statements will detail the company’s actions during the period and provide a more informative view of financial ability of the company.

For more information on Capital Corp Merchant Banking’s Due Diligence procedures, visit www.capitalcorpmerchantbanking.com.

Respectfully yours,

Capital Corp Merchant Banking