Quality of Earnings

 Quality of Earnings (QofE) is the most important part of financial and accounting analysis for deals.  

Why are QofEs so important?  Over 40% of data in company memorandums is inaccurate. Even worse, each dollar of overstated EBITDA means an investor who pays a multiple of EBITDA for a business loses 4-8 times that amount on valuation.      

It’s critical to get it right. Use our experts to give yourself the best chance of success.

 

Quality of Earnings

3 years of historical financials & validate EBITDA     Review all three financial statements and identify risks.

 

Review of Tax Returns & Bank Statements

3 years of historical tax returns & 3 years of bank statements.  

Review of Non-Recurring Expenses

There are typically some expenses incurred under former ownership that will not be part of the business under the buyer’s ownership.  

Proof of Cash

Reconcile & ensure that company provided financials match their bank statements.

Business Operating Model

How does the business make money? What drives the revenue up and down. What drives the costs up and down?  

5-Year Pro Forma Projection

Five year financial projections taking into account the deal structure and amount of debt to service after the deal closes.   

Don’t take chances on due diligence.  Invest in diligence just like you’re investing in the deal.