Project NewcoPart A - Legal Due Diligence ChecklistAssessing risks and issues in determining whether to buy a company is the number one skill venture capitalists must possess. The potential buyer of Five Friends Construction must investigate and gather all information about the company and its business assets. The purpose of this is to decide whether to proceed with the initial transaction on the terms initially discussed, establish areas of risk that require particular attention or, if warranted, withdraw from the proposed investment (Global Law Review, 2005). Creating a due diligence checklist is the way to critically evaluate a company's current and potential profitability. Elements of Legal Due Diligence Checklists There are at least sixteen elements of a legal due diligence checklist. The organization and its good reputation, financial information, physical assets, real estate, intellectual property, employees and employee benefits, licenses and permits, environmental matters, taxes, material contracts, product or service lines, customer information, litigation, insurance coverage, professionals, and advertising articles complete a comprehensive list of risks to look for before purchasing a business (FindLaw, 2005). While each of these list items is important, four main issues emerge and the focus will remain on them. Financial information, employees and employee benefits, environmental matters and a summary of the litigation are the focus of the acquisition. Finances The financial health of a company is a potential buyer's number one concern. The selling company should provide the seller with audited financial statements for the last three years, a list of inventories, a list of accounts receivable, a list of accounts payable, a list of debts and contingent liabilities, an analysis of fixed and variable expenses and a copy of the company's general accounts (FindLaw, 2005). Analyzing a company's accounts payable and accounts receivable accounts is essential. Accounts payable are a company's unpaid invoices. Accounts receivable are unpaid customer invoices and any other money owed to the company. The health of a company depends on revenue. Five Friends Construction's receivables must be greater than its debts.