Due Diligence

What Is Due Diligence?

Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party.

Key Takeaways

Due diligence is a systematic way to analyze and mitigate risk from a business or investment decision.
An individual investor can conduct due diligence on any stock using readily available public information.
The same due diligence strategy will work on many other types of investments.
Due diligence involves examining a company's numbers, comparing the numbers over time, and benchmarking them against competitors.
Due diligence is applied in many other contexts, for example, conducting a background check on a potential employee or reading product reviews.