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According to Investopedia, due diligence is an investigation or audit of a potential investment or product to confirm all facts, that might include the review of financial records. Due diligence refers to the research done before entering into an agreement or a financial transaction with another party.
Investors perform due diligence before buying a security from a company. Due diligence can also refer to the investigation a seller performs on a buyer that might include whether the buyer has adequate resources to complete the purchase.