Explain this to me like I'm 5.
Due diligence is a process or effort to collect and analyze information before making a decision or conducting a transaction so a party is not held legally liable for any loss or damage. The term applies to many situations but most notably to business transactions.
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Imagine you want to buy a toy from a store, but before you do, you want to make sure it's a good toy and that you're not going to waste your money. So, you start doing your research by asking your friends if they have the toy and if they like it. You also go online and read reviews to see if other people have had any problems with the toy. This is like doing your due diligence - you're collecting and analyzing information to make sure you make a smart decision before buying the toy. It helps you avoid getting in trouble later if the toy turns out to be not what you expected. This is important for businesses too, as they need to gather information and make smart decisions to avoid getting into legal trouble and losing money.