book

The AMA Handbook of Due Diligence

by William M. Crilly, Andrew J. Sherman

April 2010

Intermediate to advanced

841 pages

25h 34m

English

AMACOM

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What Is “Due Diligence?”
Common Mistakes Made By The Buyer During The Due Diligence Investigation
The Disclosure Requirements

Page Numbering—Text And FormsUse Of Header Block On Form Sheets
Background Information On Entity: Form 3-01Financial Summary: Form 3-02
Compatibility With Investment/Acquisition Objectives: Form 4-01Compatibility With Investment/Acquisition Criteria: Form 4-02
Potential Benefits From Acquisition: Form 4-04Potential Impact Of Locational Factors On A Prospective Investment: Form 4-05Characteristics You May Wish To Avoid: Form 4-06Why Is Entity Available?: Form 4-07
Summary Of Capitalization: Form 5-01
Common Stock - Dividend Record: Form 5-04
Capitalization - Preferred Stock: Form 5-07Preferred Stock Dividend Record: Forms 5-08
Bond Yields And Major Bond Holders: Forms 5-10
Board Of Directors - Other Affiliations And Compensation: Form 6-02Board Of Directors - Current And Prospective Security Holdings: Form 6-03
Management Style
Company Security Holdings Of Corporate Management Personnel: Form 6-07Organization And Management Information Requests: Form 6-08Board Of Directors Opinions Of Management: Form 6-09Board Members Apparent Position Regarding Potential Acquisition: Form 6-10Overall Management Assessment: Form 6-11Assessment Of Individual Management Personnel: Form 6-12
Relationship With Accounting Firms: Form 7-01Relationships With Law Firms: Form 7-02
Relationships With Investment Banks: Form 7-04
Relationships With Private Investors And/Or Investment Groups: Form 7-06Relationships With Consulting Firms: Form 7-07
Relationships With Other Professional Organizations: Form 7-09Outside Organization Information Request: Form 7-10
Summary Of Product Lines And Services: Form 8-01
Competitive Product / Service Analysis: Form 8-03
Potential Future Product And Service Improvement Opportunities: Form 8-06Recently Discontinued Products And/Or Services; Products And/Or Services Potentially Subject To Early Termination: Form 8-07
New Product Development — Summary Of Current Projects: Form 8-09Schedule Of Expenditures For Approved Development Projects: Form 8-10
Distribution Of Company Development Funds: Form 8-12
Trend In Development Expenditures, Salaries And Staffing Levels; Comparison Of Budget Versus Actual Development Expenditures: Form 8-14
Current Development Budget Considerations: Form 8-16
Accounting For Development Expenditures: Form 8-18Development Organization: Form 8-19Development Organization — Resumes of Key Personnel: Form 8-20Compensation Of Key Development Personnel: Form 8-21
Trend In Development Staffing: Form 8-23
Current Product/Service Information Request: Form 8-25New Product/Service Development Information Request: Form 8-26Summary of Major Development Strengths And Weaknesses: Form 8-27Potential Impact Of An Acquisition On The Development Organizations: Form 8-28
Trend In Total Revenues - All Products And/Or Services: Form 9-01Trend In Revenues By Product Line Or Service: Form 9-02Trend In Market Share By Individual Product Line Or Service: Form 9-03
Trend In Revenues By Customer: Form 9-05
Revenues By Distribution Channel - Direct Sales to Customers, Retailers: Form 9-07Revenues By Distribution Channel - Direct Sales to Industry, Government: Form 9-08Revenues By Distribution Channel - Sales Through Wholesale Offices, Distributors: Form 9-09Revenues By Distribution Channel - Through Sales Representatives, Other Channels: Form 9-10Revenues By Geographic Region: Form 9-11Trend In Revenues By Geographic Region: Form 9-12
Seasonal Variation In Revenues: Form 9-14
Commercial Negotiated Contracts: Form 9-16Commercial Negotiated Contracts—Renegotiation Experience; Status of Current Renegotiations: Form 9-17
Government Contracts: Form 9-19Government Contracts—Renegotiation Experience; Status of Current Negotiations: Form 9-20Trend In Revenues Generated Through Independent Distributors; Ten Largest Independent Distributors: Form 9-21Trend In Revenues Generated By Independent Sales Representatives; Ten Largest Independent Sales Representatives: Form 9-22
Backlog By Product Line Or Service: Form 9-24Book-To-Ship Ratio: Form 9-25
Lost Sales; Current Or Potential Problem Customers: Form 9-27
Potential Revenue Improvement Opportunities: Form 9-29Potential Impact Of An Acquisition On The Combined Revenues: Form 9-30
Marketing Organization: Form 10-01Marketing Organization - Resumes Of Key Marketing Personnel: Form 10-02Compensation Of Key Marketing Staff Personnel: Form 10-03
Compensation Of Direct Sales Personnel: Form 10-05Marketing Organization - Expense Accounts: Form 10-06
Marketing Locations And Facilities - Foreign: Form 10-08Marketing Channels: Form 10-09Distribution Channels - Characteristics of Present System: Form 10-10Distribution Channels - Miscellaneous Questions: Form 10-11Market Planning And Research - Organization And Activities: Form 10-12Market Planning And Research - Methodology and Expenditures: Form 10-13Advertising Organization And Activities: Form 10-14
Comparison Of Advertising Expenditures With Competitors: Form 10-16
Trade Show Participation: Form 10-18Sales Promotion Expense: Form 10-19Comparison of Sales Promotion Programs With Major Competitors: Form 10-20
Franchise Operations - Franchisee: Form 10-23Factors Impacting Marketing Activities: Form 10-24
Internal Pricing Policies: Form 10-26Special Pricing Situations: Form 10-27Price Trends: Form 10-28Current Pricing Environment: Form 10-29
Terms of Sale - Product Warranty And Return Policies: Form 10-31Terms of Sale - Competitive Environment: Form 10-32
Summary Of Observations Regarding Marketing Activities: Form 10-38Third Party Comments Regarding Marketing Activities: Form 10-39Summary Of Major Marketing Strengths And Weaknesses: Form 10-40Potential Impact Of An Acquisition On Marketing Organizations: Form 10-41Potential Impact Of An Acquisition On Outside Marketing Firms: Form 10-42
Customer Service Organization: Form 11-01Resumes Of Key Customer Service Personnel: Form 11-02Compensation Of Key Customer Service Personnel: Form 11-03Customer Service Locations: Form 11-04
Customer Service Activities: Form 11-06Quality Of Customer Services: Form 11-07
Inventory Control Organization: Form 12-01Resumes Of Key Inventory Control Personnel: Form 12-02Compensation Of Key Inventory Control Personnel: Form 12-03Inventory Control Activities: Form 12-04
Purchasing Organization: Form 12-06Resumes Of Key Purchasing Personnel: Form 12-07Compensation Of Key Purchasing Personnel: Form 12-08
Availability Of Materials And Supplies: Form 12-10Identification Of Critical Materials And Supplies: Form 12-11Price Trends For Purchased Materials And Supplies: Form 12-12Characteristics Of Major Suppliers: Form 12-13
Summary Of Largest Outstanding Purchase Contracts: Form 12-15Purchasing Policies And Procedures: Form 12-16
Inventory Control And Purchasing Information Request: Form 12-18Observations Of Inventory Control And Purchasing Activities: Form 12-19Notes Regarding Observations Of Inventory Control Activities: Form 12-20Notes Regarding Observations Of Purchasing Activities: Form 12-21Potential Impact Of An Acquisition On Inventory Control Organizations: Form 12-22Potential Impact Of An Acquisition On Purchasing Organizations: Form 12-23
Production Organization: Form 13-01Resumes Of Key Production Personnel: Form 13-02Compensation Of Key Production Personnel: Form 13-03Production Methods And Processes: Form 13-04
Production Equipment: Form 13-06Future Production Equipment Requirements: Form 13-07Surplus Production Equipment: Form 13-08Trend In Production Equipment Acquisitions And Accounting Policies: Form 13-09
Production Capacity And Utilization; Potential Impediments To Nearby Expansion: Form 13-11
Quality Control: Form 13-13Stockroom Operations: Form 13-14
Production Cost Accounting: Form 13-16Intra-Company Material Transactions: Form 13-17Subcontracting To Others: Form 13-18
Utility Services: Form 13-20
Trend In Production Staffing: Form 13-22Production Department Financial Performance: Form 13-23Trend In Production Productivity: Form 13-24
Production Information Request: Form 13-26Summary of Observations Regarding Production Activities: Form 13-27Summary Of Major Production Strengths And Weaknesses: Form 13-28Potential Impact Of An Acquisition On Production Organizations: Form 13-29
Physical Distribution Organization: Form 14-01Resumes Of Key Distribution Personnel: Form 14-02Compensation Of Key Distribution Personnel: Form 14-03
Warehouse Facilities: Form 14-05Major Distribution Equipment: Form 14-06Trend In Distribution Equipment Acquisitions; Accounting Policies With Respect To Major Equipment Items: Form 14-07
Distribution Of Outbound Transportation By Type of Carrier; Competitive Distribution Environment: Form 14-09
Summary Of Observations Regarding Distribution Activities: Form 14-11Summary Of Observations Regarding Distribution Activities - Notes: Form 14-12Summary Of Major Distribution Strengths And Weaknesses: Form 14-13Potential Impact Of An Acquisition On The Distribution Organization: Form 14-14
Organization Of Computer, Communications And Information Systems: Form 15-01Resumes Of Key Computer, Communications And Information Systems Personnel: Form 15-02Compensation Of Key Computer, Communications And Information Systems Personnel: Form 15-03Computer Applications: Form 15-04Outside Computer Services: Form 15-05
Computer Inventory: Form 15-07Communications Applications: Form 15-08
Integrated Computer / Communications Systems: Form 15-10
Integrated Computer / Communications / Information Systems: Form 15-12Trend In Computer, Communications And Information Systems Staffing: Form 15-13Trend In Computer, Communications And Information Systems Expenses: Form 15-14
Computer, Communications And Information Systems Information Request: Form 15-16Summary Of Observations Regarding Computer, Communications And Information Systems: Form 15-17Summary Of Computer, Communications And Information Systems Strengths And Weaknesses: Form 15-18Potential Impact Of An Acquisition On The C.C. & I. Organization: Form 15-19
Financial Organization: Form 16-01Resumes Of Key Financial Personnel: Form 16-02Compensation Of Key Financial Personnel: Form 16-03Accounting Policies And Procedures: Form 16-04
Foreign Exchange Transactions: Form 16-06Internal Audit Function: Form 16-07Financial Planning And Budgeting: Form 16-08
Financing Activities: Form 16-10
Investment Management: Form 16-12
Trend In Finance Department Expenses: Form 16-16Financial Operations Information Request: Form 16-17Summary Of Observations Regarding Financial Operations: Form 16-18Summary Of Financial Strengths And Weaknesses: Form 16-19Potential Impact Of An Acquisition On The Finance Organization: Form 16-20
Legal Organization; Compensation Of Key Legal Personnel: Form 17-01Resumes Of Key Legal Personnel: Form 17-02Legal Department Activities: Form 17-03Litigation Summary - Entity Is Plaintiff: Form 17-04Litigation Summary - Entity Is Defendant: Form 17-05Potential Litigation - Entity Is Plaintiff: Form 17-06Potential Litigation - Entity Is Defendant: Form 17-07Recently Concluded Litigation - Entity Was Plaintiff: Form 17-08Recently Concluded Litigation - Entity Was Defendant: Form 17-09
Licensing Agreements: Form 17-11
Regulatory Compliance Actions: Form 17-13Officers’ And Directors’ Background Information: Form 17-14Trend In Legal Department Staffing; Outside Legal Services: Form 17-15Trend In Legal Department Expenses: Form 17-16
Summary Of Observations Regarding Legal Activities: Form 17-18Summary Of Major Legal Strengths And Weaknesses: Form 17-19Potential Impact Of An Acquisition On The Legal Organization: Form 17-20
Security Organization; Safety Organization: Form 18-01Potential Security Problems: Form 18-02Potential Safety Problems: Form 18-03Other Security / Safety Matters: Form 18-04
Resumes Of Key Human Resources Personnel: Form 19-02Trend In Human Resources Department Staffing; Outside Services: Form 19-03Trend In Human Resources Department Expenses: Form 19-04Distribution Of Personnel By Various Categories: Form 19-05
Retirement Benefits - Pension Plans: Form 19-07Retirement Benefits - Other Than Pension Plans: Form 19-08Basic Wage And Salary Factors: Form 19-09
Perquisites; Reimbursement For Relocation Expenses: Form 19-11
Organized Labor Agreements: Form 19-13
Hiring Policies And Procedures: Form 19-15Termination Policies; Termination Benefits: Form 19-16Training Programs: Form 19-17
Human Resources Information Request: Form 19-19Summary Of Observations Regarding Human Resources Activities: Form 19-20Summary Of Major Human Resources Strengths And Weaknesses: Form 19-21Potential Impact Of An Acquisition On The Human Resources Organization: Form 19-22Potential Cost Of Integrating Human Resources Policies: Form 19-23Estimated Personnel Relocation Expenses: Form 19-24
Summary Of Active Domestic Facilities: Forms 20-01Summary Of Active Foreign Facilities: Form 20-02Physical Characteristics Of Active Facilities: Form 20-03Financial Characteristics Of Owned Facilities: Form 20-04Financial Characteristics Of Leased Facilities: Form 20-05
Factors Potentially Impacting The Future Value Of Existing Facilities: Form 20-07Production Capacity And Potential Modifications To Existing Facilities: Form 20-08Summary Of Currently Inactive Facilities; Potential Retirement Of Currently Active Facilities: Form 20-09Summary Of Undeveloped Land; Trend In Real Property Taxes: Form 20-10
Property And Facilities Information Request: Form 20-12
Short-Term Notes Payable: Form 22-01Short-Term Debt Service Payments; Principal Balances Of Short-Term Debt: Form 22-02
Explanation For Overdue Payables: Form 22-04Accounts Payable Analysis: Form 22-05Trend In Unearned Revenues; Trend in Accrued Expenses: Form 22-06
Features of Bond Issues: Form 22-09Long-Term Debt Service Payments; Principal Balances Of Long-Term Debt: Form 22-10Recent Bond Performance: Form 22-11
Classification Of Revenue AccountsTrend In Gross Revenues, Revenue Reductions, And Net Revenues: Form 23-01
Selling Expenses: Form 24-01Selling Expenses As A Percent Of Net Revenues: Form 24-02Variation In Selling Expense With Net Revenues: Form 24-03
General And Administration Expenses As Percent Of Net Revenues: Form 24-06Variation In General And Administrative Expenses With Net Revenues: Form 24-07Comparison Of General And Administrative Expenses As A Percent Of Net Revenues: Form 24-08
Payroll Related Expenses As A Percent Of Payroll Expenses: Form 24-10Comparison Of Payroll Related Expenses As A Percent Of Payroll Expenses: Form 24-11
Status Of Income Tax Filings And Audits; Provision For Income Taxes: Form 25-01Elements Of Deferred Taxes; Effective Tax Rate: Form 25-02Availability Of Net Operating Loss; Deficiency Claim Settlements: Form 25-03
Trend In Net Income; Comparison Of Profit Margin With Industry Averages And With Selected Companies: Form 26-01
Trend In Adjusted Capital Expenditures; Comparison Of Adjusted Capital Expenditures With Net Revenues: Form 27-02
Liquidity Measures: Form 29-03Debt Ratios: Form 29-04Activity Ratios: Form 29-05
Trend In Common Stock Performance Ratios: Form 29-07Trend In Liquidity Measures: Form 29-08Trend In Debt Ratios: Form 29-09Trend In Activity Ratios: Form 29-10
Projection Of Cost Of Goods Sold And Gross Margin: Form 30-02
Projection Of General And Administrative Expenses: Form 30-04
Projection Of Operating Income: Form 30-06Projection Of Other Income And Expenses: Form 30-07Projection Of Unusual And Infrequent Items: Form 30-08Projection Of Unusual, Infrequent And Extraordinary Items: Form 30-09Basis For Projections Of Unusual, Infrequent And Extraordinary Items: Form 30-10
Comparison Of Entity’s And Investigator’s Projections: Form 30-12
Projection Of Current Asset Requirements: Form 31-01Projection Of Property, Plant And Equipment: Form 31-02
Projection Of Short-Term Debt: Form 31-04Projection Of Accounts Payable: Form 31-05Projection Of Unearned Revenues And Accrued Expenses: Form 31-06
Projection Of Shareholders’ Equity Other Than Retained Earnings: Form 31-08Projection Of Change In Retained Earnings: Form 31-09
Monthly Debt Service Payments On Current Short-Term Notes Payable And Current Portion of Long-Term Debt: Form 32-02Annual Debt Service Payments Based On Current Debt: Form 32-03
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Content preview from The AMA Handbook of Due Diligence

TREND IN DEBT RATIOS

ENTITY Form 29-09

REF.

PREPARED BY REVIEWED BY

REVISION DATE SECTION PAGE

654

YEAR 20 20 20 20 20

DEBT TO EQUITY RATIO

Long Term Debt ($000) $ $ $ $ $

Shareholders’ Tangible Equity ($000)

Debt Equity Ratio % % % % %

DEBT TO TOTAL CAPITAL

Long Term Debt ($000) $ $ $ $ $

Total Capital ($000) (1)

Debt To Total Capital % % % % %

INTEREST COVERAGE

Earnings Before Interest And

Taxes ($000)

$ $ $ $ $

Interest Expense ($000)

Interest Coverage Times Times Times Times Times

COVERAGE OF FIXED CHARGES

Earnings Before Interest And

Taxes ($000)

$ $ $ $ $

Interest Plus Lease Payments ($000)

Coverage Of Fixed Charges Times Times Times Times Times

Note: (1) Total ...

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Publisher Resources

ISBN: 9780814413821