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The AMA Handbook of Due Diligence by Andrew J. Sherman, William M. Crilly

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ENTITY Form 10-26
REF.
PREPARED BY REVIEWED BY
REVISION DATE SECTION PAGE
242
INTERNAL PRICING POLICIES (Continued)
PROMOTIONAL ALLOWANCES
Does the Company provide advertising or other types of promotional allowances? [ ] Yes [ ] No
If so, describe the conditions that must be met to qualify for these allowances and how the amount of the
allowances are determined.
ABSORPTION OF FREIGHT CHARGES
Does the Company absorb outbound freight charges? [ ] Yes [ ] No
If so, under what circumstances?
PRICING FLEXIBILITY
Do direct sales personnel have the flexibility to sell below list prices without receiving permission from the
corporate office? [ ] Yes [ ] No
If so, under what circumstances and within what range?
SPARE PARTS PRICING
Is the entity involved in the sale of spare parts? [ ] Yes [ ] No
If so, what are its parts pricing objectives?
[ ] Margins comparable to assembled product pricing, i.e., ______%
[ ] Increased margins over those for assembled products, i.e., ______%
[ ] What the market will accept.
[ ] Other: _______________________________________ .
ENTITY Form 10-27
243
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REVISION DATE SECTION PAGE
SPECIAL PRICING SITUATIONS
COMPETITIVE BIDDING
Is the entity involved in formal competitive bidding for any portion of its business? [ ] Yes [ ] No
If so, approximately what percent of its current sales were generated under this process? _______%
How do the profit margins compare with those of its other business?
[ ] Approximately the same. [ ] Lower by approximately_______ %
What specific customers and products are involved?
CUSTOMER PRODUCT
NEGOTIATED CONTRACTS
Is the entity involved in formally negotiated contract business? [ ] Yes [ ] No
If so, approximately what percent of its current sales were generated under this process? _______ %
How do the profit margins compare with those of its other business?
[ ] Approximately the same. [ ] Lower by approximately_______ %.
What specific customers and products are involved?
CUSTOMER PRODUCT
ENTITY Form 10-28
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244
PRICE TRENDS
PAST PRICE TRENDS
PRODUCT LINE 20 20 20 20 20
Percent Change From Previous Year
What have been the major factors underlying these trends? (1)
What are the underlying factors that are anticipated to bring about these trends? (1)
ANTICIPATED FUTURE PRICE TRENDS
PRODUCT LINE 20 20 20
Percent Change From Previous Year
Note: (1) For example: labor cost changes, material cost changes, competitive conditions, etc.
ENTITY Form 10-29
245
REF.
PREPARED BY REVIEWED BY
REVISION DATE SECTION PAGE
CURRENT PRICING ENVIRONMENT
COMPETITIVE PRICING ENVIRONMENT
PRODUCT LINE COMPETITOR A COMPETITOR B COMPETITOR C
Note: (1) Competitor A: ______________________ B: _______________________ C: _____________________
(2) On the first line, indicate how the competitor’s current prices compare with those of the entity, i.e.,
“Same”, “_____ % Higher”, or “_____ % Lower”.
(3) On second line, indicate the basis, if known, for significant price differences noted on the first line. For
example: “S” = better service, “W” = better warranty, “Q” = better quality, “A” = Appearance, “C” = better
credit terms, etc.
Note: (1) Indicate “Yes”, “Questionable”, “Doubtful”, or “No”, as appropriate.
(2) Assume a “modest” price change is plus or minus five percent or less. Enter “Highly” if it is anticipated that
a price increase will result in significant decrease in sales, or a price reduction will result in a significant
increase in sales. Enter “Low” if it is anticipated that a modest price change will have very little impact.
CURRENT MARKET ELASTICITY
PRODUCT LINE CAN THE MARKET
ABSORB A PRICE
INCREASE AT THIS
TIME (1)
WILL COMPETITIVE
CONDITIONS PERMIT
AN INCREASE AT THIS
TIME (1)
HOW SENSITIVE IS
SALES VOLUME TO
MODEST PRICE
CHANGES (2)
ENTITY Form 10-30
REF.
PREPARED BY REVIEWED BY
REVISION DATE SECTION PAGE
246
TERMS OF SALE AND CREDIT POLICIES
PAYMENT TERMS AND CREDIT POLICIES
What are the entity’s standard payment terms?
Standard payment terms: _______ Days. Discount for cash payment: _______ %.
Discount for early payment: ________ % if paid within _______Days.
Other:__________________________________________________________________________________
Are penalties assessed for late payment? [ ] Yes [ ] No If so, on what basis?
On what basis does the entity sell to known high credit risk customers?
Do payment terms vary when products are produced to customer’s unique specifications? [ ] Yes [ ] No
If so, what are the revised terms?
Does the entity require a deposit or advance payment for certain types of orders? [ ] Yes [ ] No.
If so, under what circumstances?
Does the entity require progress payments for certain types of orders? [ ] Yes [ ] No
If so, under what circumstances?
EXCEPTIONS TO CREDIT PAYMENT TERMS
How frequently are exceptions granted to the standard payment terms and credit policies?
[ ] Never [ ] Seldom [ ] Frequently
Who are authorized to grant exceptions to the standard policies?
Name: _____________________________ . Title: ____________________________________________ .
Name: _____________________________ . Title: ____________________________________________ .

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