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Quality of Earnings Report


We know that your business is not just your business - it’s your life’s work.

Maximizing Your Sale

A Quality of Earnings Report is a vital part of the due diligence process when selling, buying or investing in a business. Preparing a detailed Quality of Earnings (Q of E) analysis can help
establish an equitable price that reflects a business’ true viability. A Q of E Report provides an independent comprehensive analysis of all the components of a company’s revenue and expenses. It analyzes and reports on detailed aspects that may not be readily identifiable to a buyer or seller in an ordinary review of the financial statements.

No potential buyer wants to be met with surprises. By providing a professional, third-party analysis of the business, it will be primed for an orderly, transparent and quick acquisition.

Get in touch with an Advisory Specialist

Marc Gelbtuch, CPA/CFF

Director, Advisory Services
718.975.5363
mgelb@rothcocpa.com

  • The Benefits of a Q of E Report
  • A Quality of Earnings Report is a standard component of the due diligence process for private acquisitions. Net income is not always the most accurate indication of financial performance for a business. There are many key details that are not outlined in a company’s income statements. A Q of E Report assesses how a company accumulates its revenues – such as cash or non-cash,
    recurring or nonrecurring. It reveals unique or unusual factors that characterize the business, that may not be apparent in a standard review of its financial statements.


  • Enhance Your Positioning
  • A Q of E Report helps potential buyers believe in the story of
    the business, and it enables potential sellers to offer a third party
    validation of the business’ status. This will make any
    potential buyer or seller more confident in their transaction.


  • Speak the Buyer's Language
  • A Quality of Earnings Report will present financials the
    way buyers think about them. This process helps eliminate
    misunderstandings or miscommunications related to
    accounting interpretations.


  • Avoid Lengthy Price Negotiations
  • AVOID LENGTHY PRICE NEGOTIATIONS
    Most private equity buyers use debt to fund transactions, which
    drives the purchase price. But lenders will not issue final term
    sheets without the seller supporting his offer with a Q of E
    study. Proactive preparation of a Quality of Earnings Report helps ensure that valuations presented in letters of intent are more precise and accurate.


  • Quicker Timeline
  • The ability to offer a prepared Quality of Earnings Report increases the speed and likelihood of closing. Quality of Earnings studies typically take around 30 days. Completing this concurrently with your due diligence may eliminate delays following the tender of a letter of intent.
    Remember, “time kills all deals.” Every day that a deal remains static is a day of lost opportunity.


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Quality of Earnings Report