Quality of Earnings (QoE) Report

With our Quality of Earnings (QoE) Report, you'll have peace of mind knowing a team of highly experienced and qualified CPAs have exhaustively and diligently combed through your prospective business' financials to ensure everything checks out.

Our QoE Report service may include, but is not limited to, advice and recommendations with respect to the review of financial information, contract and financial reporting matters, and financial due diligence analyses and inquiries. We will review background financial and structural information, analyze historical trends over a period mutually agreed upon by both parties, as well as review and assess detailed transactions including accounts receivable, accounts payable, normalized net working capital, prepaid expenses, and more. We will deliver a due diligence report which will present (i) an assessment of normalized EBITDA for an agreed upon timeframe and (ii) normalized net working capital for the last fiscal year-end. The report will cover the Quality of Earnings and may include, as mutually agreed between the parties, other ad hoc analyses which may be useful to you as a prospective buyer and owner. Here's a breakdown of everything included:

  • Read available background information (Target’s history, structure, and operations) and internal financial data and management reporting/analysis packages
  • Analyze the methodology for which the financial information for the Target is prepared, including any assumptions, adjustments, and allocations
  • Analyze the intercompany/related party activity taking place between the Target and other Owner businesses outside the transaction perimeter and inquire how these transactions are being reflected in the Target’s carve-out financial information (if applicable)
  • High-level analysis and commentary on trends in direct operating and SG&A costs incurred within the business
  • We will also inquire about:
    • Out of period, nonrecurring, unusual and non-cash items
    • Top customers and vendors, new or lost customer relationships
    • Management proposed adjustments to normalize EBITDA (if any)
    • Non-operating expenses
  • Analyze historical working capital trends, with a focus on seasonality, high/low points, potential normalizing items, and average run rate
  • Analyze normalized net working capital trends
  • Analyze a summary of accounts receivable, including aging and bad debt statistics
  • Analyze the composition of inventory and inquire about: Target’s inventory costing methodology, reserve policies, and write-down history, broken down by inventory-type
  • Analyze a summary of prepaid expenses, deferred cost of sales and other current assets to obtain an understanding of related impact on future earnings
  • Analyze a summary of account payables, including aging statistics. Inquire about normal and special credit terms (including rebates), significant past due payables and disputes with suppliers
  • Prepare and submit additional data requirements and questions relevant to our scope

Please note that the deliverables will be prioritized in an effort to communicate significant issues and findings as they arise so that Buyer can, as it deems appropriate, address the related business and deal issues as soon as possible. It will not always be possible for all of our communications to be in the form of written reports.

As with all of our services, our Quality of Earnings (QoE) Report service offers unlimited customer support so we'll be there to help and offer advice long after we've delivered our finalized report to you. Plus, you get direct access to your dedicated Certified Public Account (CPA) via phone, chat and email so they're always just a call away. Once you're ready to move forward or if you have any questions, feel free to contact us and we'd be happy to answer your questions and provide you with more information regarding pricing and timeline.