Management representation

A statement made by the people selling or running the thing you are examining, whether spoken, written in a deck, or set out in a document they prepared.

Example

"Our largest customer is about 15% of revenue," said on a call and recorded in your notes as a fact.

Important

It is evidence about the person making it, not about the claim. Mark it as told rather than checked, because once it enters a model its provenance is lost permanently.

Related terms

  • Primary source — A document that originated outside the transaction and was created for some purpose other than persuading you - bank statements, filed returns, signed contracts, public registers.
  • Independent verification — Confirming a claim against a source that was not produced by, and has no stake in, the transaction - a bank statement, a public register, a counterparty, a regulator.
  • Representations and warranties — The statements of fact a seller formally makes in a transaction document, which the buyer is entitled to rely on and can claim against if untrue.

Lessons that explain it

  • A pipeline is worth its probability, not its headline — Sales pipelines are presented at full value. Weighting deals by stage, checking historical conversion and removing stale deals shows how much revenue is realistically coming. (10 min)
  • What you were told, what you inferred, and what you checked — Almost everything that later turns out to be wrong was never actually verified - it was assumed, because it arrived alongside things that were true. (10 min)
  • Runway is cash in the bank divided by what really leaves each month — Diligence recalculates burn and runway from bank statements rather than from management's summary, separating gross burn from net burn and cash held from cash promised. (10 min)
  • Consistency across conversations is the most practical integrity test — Integrity and leadership are hard to measure directly. Diligence looks at observable signals: whether numbers stay consistent, how bad news is delivered, how people are treated and how the founder responds to challenge. (10 min)

All 578 terms in the Investing glossary