Interested in investing in a company that is raising funds under Regulation Crowdfunding (Reg CF), Regulation A or Regulation D? That means doing your homework— understanding what you are investing in and making an “informed investment decision. In other words, due diligence.
In this article, we’ll explore the basics of financial due diligence, which includes assessing the financial health of a company, its valuation, and reviewing the terms of the offering. An earlier article covered the legal and business issues to consider when conducting due diligence.
FINANCIAL DUE DILIGENCE
When it comes to assessing a company’s financial health, your first step should be reviewing the company’s financial statements. Financial statements are reports that companies produce to summarize their financial activity and condition—including income statements, balance sheets and cash flow statements. Unlike public companies, which report quarterly, financial statements for startups are usually produced annually, and sometimes semi-annually. Analyzing financial statements can be complicated. For a good introduction, see the SEC’s Beginner’s Guide to Financial Statements.
How reliable are the financial statements? Did anyone check them? […]
The full and original article can be viewed on Locavesting.com
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