Due Diligence - DD
1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to a sale.
2. Generally, due diligence refers to the care a reasonable person should take before entering in an agreement or transaction with another party.
Investopedia Commentary
1. Offers to purchase an asset are usually depend on the results of due diligence analysis. This includes reviewing all financial records plus anything else deemed material to the sale. Sellers could also perform a due diligence analysis on the buyer. Items that may be considered are the buyer's ability to purchase, as well as other items that would affect the purchased entity or the seller after the sale has been completed.
2. Due diligence is essentially a way of preventing unnecessary harm to either party involved in a transaction.
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See also: Audit, Know Your Client - KYC