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Acme Corp – Due Diligence Report

Acme Corp

Investor-Grade Due Diligence Report
📅 Date: 8 October 2025 – Sydney, Australia
🏢 Pecunio Due Diligence Agent | Model: GPT-4 CFO Variant

🎯 Executive Summary

62%
Investor Readiness Score
Grade: B
$6.6M
Net Assets
3-4
Months to Readiness

💪 Top Strengths

  • Strong net asset position (Net Assets: $6.6M)
  • Detailed asset/acquisition tracking, good records of share capital structure
  • Positive current ratio – short-term solvency looks manageable (Current Assets : Current Liabilities = 3.91x)

⚠️ Top Risks

  • Revenue sharply down YTD, net losses in latest periods
  • Receivables ballooning (AR: $1.6M+), average debtor days >500 – major collection risk
  • Significant expenses and operating cash outflows, sustained negative net profit YTD

🎯 Critical Path Recommendations

  1. Address AR collection and debtor management immediately.
  2. Review expense structure, prioritise cuts and controls, especially discretionary and travel lines.
  3. Provide narrative for revenue drop and implement recovery/growth plan.
  4. Strengthen documentation and internal financial controls.
  5. Prepare for next phase: legal, tax, and commercial deep dive.

⏳ Implementation Timeline

Immediate
(0-30 days)
Short-term
(1-3 months)
Medium-term
(3-6 months)
Long-term
(6+ months)

📊 Financial Statements & Performance

Performance Score: 55/100

Volatile revenue and profit/loss profile with concerning recent trends.

$683k
FY23 Revenue
✓ Profit: $164k
$381k
FY24 Revenue
✗ Loss: $151k
$101k
FY25 YTD Revenue
✗ Loss: $51k

🚨 Material Issues

  • Major 12-month revenue decline (>40%) with no provided explanation
  • Sustained negative earnings, EBITDA/Net Losses YTD
  • Gross margins fluctuating, deteriorating in latest periods
  • Expenses increasing as % of revenue; fixed costs too high for current sales volume

💡 Recommendations

  • Urgent revenue growth or diversification plan
  • Rework expense base for a leaner operation
  • Provide detailed commentaries for recent revenue/profit drops

💰 Revenue & Customer Quality

Performance Score: 50/100

Critical accounts receivable issues and customer concentration risks.

$1.66M
Outstanding Receivables
(up from $775k last year)
500+
Average Debtor Days
(Industry benchmark: <60)
60%+
Top 5 Customer Concentration

🚨 Critical Findings

  • Outstanding AR >$1.6M – severe collection/credit risk
  • High percentage of overdue invoices
  • Multiple long-term outstanding invoices
  • Lacking robust process for AR follow-up and customer credit management
  • Recurring revenue model unclear; heavy orientation to large once-off/trade deals

💡 Immediate Actions Required

  • Implement aggressive AR collection/credit control program
  • Diversify customer base to reduce concentration risk
  • Improve recurring/predictable revenue streams
  • Establish customer credit limits and terms
  • Weekly AR aging reports and follow-up procedures

🏭 Expense Management & Operations

Performance Score: 68/100

Good expense visibility but optimization opportunities exist.

✅ Positive Findings

  • Expense breakdown clear and detailed
  • Core vendors well-identified
  • Some vendor dependencies mapped
  • General ledger integrity good (74% score)
  • Tax compliance current (70% score)

⚠️ Areas for Improvement

  • Large discretionary/travel/consulting outlays not commensurate with scale
  • “General” and other vague accounts over threshold
  • High spend on external consulting not matched by profitable results
  • Some uncleared suspense/balance sheet items

🎯 Optimization Recommendations

  • Review, justify, or freeze non-critical vendor spending
  • Strengthen contract management with major vendors
  • Clear all suspense accounts with supporting documentation
  • Implement monthly bank/GL reconciliation consistency
  • Strengthen tax provisioning and documentation

    • 📈 Balance Sheet Quality & Asset Management

    Performance Score: 71/100

    Strong asset position with good documentation and tracking.

    $6.6M
    Net Assets
    3.91x
    Current Ratio
    (vs industry 1.4-2.1x)
    $401k
    Current Cash Balance
    (declining trend)

    💪 Asset Strengths

    • Detailed asset register (plant, vehicles, IP, equity investments)
    • Well-maintained depreciation schedules
    • Strong overall net asset position
    • Good tracking of acquisitions and capital structure

    ⚠️ Areas Requiring Attention

    • Complex intercompany/related party balances
    • Some asset register to GL reconciliation gaps
    • Debt and financing obligations require covenant review
    • Negative operating cash flow trending

    🚨 Cash Flow Concerns

    • Recent months showing negative operating cash flow
    • Bank balance declining from earlier periods
    • High burn rate with low coverage period
    • Poor cash generation conversion despite healthy current ratio

    🚨 Critical Risk Flags

    Area Issue Materiality Status
    ⚠️ Revenue YoY decline, no explanation provided Critical 🔴 Urgent
    ⚠️ Receivables AR days > 500, $1.6M+ outstanding Critical 🔴 Urgent
    💸 Expenses Cost base too high for current turnover High 🟠 High Priority
    ⏳ Data/Process Missing AR/AP supporting notes High 🟠 High Priority
    🔁 Suspense/GL Uncleared suspense/rounding accounts Moderate 🟡 Monitor
    📬 Process Unusual volatility in cash, invoices High 🟠 High Priority

    📈 Benchmarking & Peer Context

    Key Ratio Acme Corp Industry Average Assessment
    Current Ratio 3.9x 1.4–2.1x ✅ Excellent
    Avg Debtor Days 509 <60 ⚠️ Critical
    Gross Margin 57% 45–65% ✅ Good
    Net Margin Negative (2 years) 2–15% ⚠️ Poor
    Implication: Liquidity and asset base are relatively strong, but operational efficiency, collections, and sales engine must be remediated to attract professional or institutional capital.

    🗺️ Investor Readiness Roadmap

    Final Assessment: 62% – Grade B

    Investment Not Ready. Moderate risk with material remedial actions required. Estimated 3–4 months to reach institutional or professional investor readiness.

    🚀 Immediate Actions (0–30 days)

    1. Aggressive AR collections and credit controls
    2. Cost freeze and non-essential spend cuts
    3. Issue management narrative (revenue drop, growth plan)
    4. Audit suspense/GL accounts

    📋 Short-term Goals (1–3 months)

    1. Diversify sales/client base
    2. Clean up manual journals, formalise reconciliation policies
    3. Strengthen payroll/contractor compliance documentation
    4. Implement robust AR management processes

    🎯 Medium-term Objectives (3–6 months)

    1. Achieve sustained positive operating cash flow
    2. Implement expanded board/governance protocols
    3. Complete asset-to-register reconciliations
    4. Establish predictable revenue streams

    🌟 Long-term Vision (6+ months)

    1. Strategic growth and sector benchmarking (for premium valuation)
    2. Prepare for legal/commercial diligence
    3. Position for institutional investment
    4. Scale operations for sustainable growth

    📊 Detailed Scoring Breakdown

    Category Score (%) Weight Weighted Score
    Financial Statements 55 25% 13.75
    Revenue & Customers 50 20% 10.0
    Expenses & Vendors 68 15% 10.2
    GL Integrity 74 15% 11.1
    Tax & Compliance 70 10% 7.0
    Balance Sheet Quality 71 10% 7.1
    Cash Flow & Liquidity 45 5% 2.25
    Overall Total 100% 61.4