Financial Due Diligence Analyst

Role cheat sheet

Adjusted EBITDA

Bridge from reported to maintainable earnings. Require evidence for nonrecurring items, owner costs and other proposed adjustments.

Cash conversion

Check whether adjusted earnings translate to operating cash. Investigate receivables, inventory, supplier terms and capex.

Review the lesson

Net debt and debt-like items

Start with borrowings less agreed cash and adjust for debt-like obligations under the purchase agreement.

Review the lesson

Working capital peg

Compare agreed normal working capital with closing working capital. Use the same definition for the peg and the closing balance.

Seasonality

Compare like periods and assess trailing monthly balances. Year-end figures alone may misstate normal funding needs.

Review the lesson

Double counting

Map each item to earnings, net debt or working capital according to its economic effect and the agreement. Reconcile adjustments to the price bridge.

Practise interview questions