Assessing the margin, looking for missing expenses, and bringing in industry knowledge are key steps in analyzing the Profit per Product or Service in Quality of Earnings.

Entering into a business investment is no small feat. Aside from factors like your goals and budget, you have to consider how successful the business will be in the long term based on the information you have about its past and present.

A Quality of Earnings report plays a significant role in the due diligence process. It makes sure the numbers are solid in the business you want to acquire and that you know exactly what you're investing in. As implied by the name, a Quality of Earnings report helps you assess the quality of a target firm’s earnings (profit, SDE, etc.). Are they sustainable and lasting or a temporary fluke? Do they come from a diverse customer base or are you putting all your eggs in one risky basket?

Included in the QoE is the adjusted EBITDA, which helps business buyers understand the value of the business they’re evaluating and can help them negotiate a better price.

Your acquisition deals are some of the most important research projects you will ever take on. Not only are you making what is probably your biggest investment so far, but you might be setting yourself up for life. This isn’t the research paper to start at 10 PM the night before it’s due. This is the research paper you begin as soon as it’s assigned and continue refining until it’s due. You should approach your deal like a researcher because the more you know, the less risk you’ll experience in your deal.