| Current Financial Condition |
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What is the true operational cash flow? Are there any foreseeable changes? Are there seasonal trends? |
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Are receivable turns appropriate? |
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What are the root causes of slow pays? Do slow pays suggest product, service or sales issues? Are slow pays also on the sales forecast? |
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What off balance sheet financing exists? What are the unstated liabilities? |
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Are accounts routinely reviewed, or will there be significant year-end accruals or accounting adjustments? |
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Are there significant slow-moving items in inventory? |
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Have there been recent changes in the sales mix? |
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| Information Systems |
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Are information systems adequate for the existing business? |
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Is the information system pro-active or re-active to growth? Where are the stress points in the system as the business grows? |
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Do system back-ups routinely occur? Are they tested? |
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Are system recovery practiced and tested? Frequency? |
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Is there a written computer policy? |
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Is the target compliant with software licensing? |
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| Key Business Relationships |
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Are there reviews for changes in volumes of business between company and vendors, customers? |
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Are there risk management practices with vendors and customers? |
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What is the relationship with key lenders? |
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What are danger points on covenant compliance? |
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Are bank reports timely and accurate? |
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Are bills being paid on a reasonable basis? |
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| Owner Motivations |
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How are owners compensated? |
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What are owner take-outs and perks other than salary? |
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What is near and long-term equity plan philosophy of company? Is management acting consistent with stated philosophy? |
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Is individual compensation aligned with objectives of the business? |
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Why do owners want to sell? What are their cost verses equity motives? |
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| Risk Management |
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Is insurance coverage methodically reviewed? Does coverage make sense for current and anticipated future of business? |
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What types of implied commitments and exposures exist within sales agreements and employment agreements? |
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Is there a clear and comprehensive human resources policy? Are there exposure areas? |
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Are there any pending or potential legal issues? Have there been any potential or actual legal issues in the last 3 years of business? |
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Are we current and compliant in our taxes? |
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