Quality of Earnings
Whether you're buying or selling a business, our QoE reports equip you with the insights needed to navigate the transaction process confidently.
A Quality of Earnings (QoE) analysis is a comprehensive review of a company's financial records to assess the sustainability and accuracy of its earnings.
It helps identify any anomalies, non-recurring items, or accounting practices that may distort the true financial performance, providing a clearer picture of a company's operational health and profitability.
A QoE helps both buyers and sellers address potential concerns upfront, ensuring a faster and more efficient transaction overall.
QoE Report Contents
Our QoE reports are tailored to meet your specific needs and objectives. Typical contents include the following:
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Summary of the company's financial performance.
Key adjustments to earnings.
Major risks or opportunities identified.
Conclusion on the quality and sustainability of earnings.
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Revenue breakdown by product, service, geography, or customer.
Analysis of recurring vs. non-recurring revenue.
Identification of revenue concentration risks (e.g., reliance on a few customers).
Examination of revenue recognition policies and practices.
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Breakdown of major expense categories (e.g., COGS, SG&A, R&D).
Identification of non-recurring or unusual expenses.
Analysis of expense trends and drivers.
Evaluation of cost structure efficiency.
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Normalize earnings to reflect true operating performance.
Calculation of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
Adjustments for non-recurring items (e.g., one-time gains/losses, restructuring costs).
Adjustments for owner-related expenses (e.g., discretionary spending, excess compensation).
Adjustments for non-operational items (e.g., interest income, foreign exchange gains/losses).
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Analysis of operating, investing, and financing cash flows.
Comparison of cash flow to reported earnings.
Assessment of working capital requirements.
Analysis of cash flow drivers and sustainability.
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Detailed financial statements (income statement, balance sheet, cash flow statement).
Supporting schedules (e.g., revenue by customer, expense breakdowns).
Methodologies and assumptions used in the analysis.
QoE for Buyers
Mitigate Risk: Avoid overpaying or acquiring a business with hidden liabilities
Accurately Value: Justify purchase price based on normalized earnings.
Improve Operational Insights: Plan for post-transaction cash flow needs and avoid liquidity issues.
Support Financing: Secure financing more easily by demonstrating the stability of the target's earnings.
QoE for Sellers
Maximize Sale Price: Provide a clear, data-backed explanation of your company's earnings and valuation.
Showcase Strengths: Build trust and credibility upfront and make your business more attractive to buyers.
Improve Negotiation Position: Equips sellers with data to defend their valuation and leverage better deal terms.
Speed Transaction Process: Address potential financial questions upfront and streamline the due diligence process.
Why Choose Us
Experienced Professionals
Our team has extensive experience in preparing high-quality QoE reports that have increased valuation and decreased time to close for 100s of transactions.
Industry Expertise
We are CFOs who have sat in your position - having worked in many companies in the healthcare, business services, manufacturing and energy sectors.
Quick Turnaround
We deliver our QoE reports in as little as 2 to 3 weeks from start to finish.
Confidential and Reliable
We uphold strict confidentiality and deliver reliable, detailed reports you can trust.
Schedule a Complimentary Consultation and Learn More about What We Can Offer.
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