Due Diligence

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.