Quality of Earnings Report

what is a quality of earnings report

Why do I want a Quality of Earnings Report (QoE)?

A Quality of Earnings Report (QoE) is simply about Trust and Relationships.

Valuing and selling a business only works when the seller and buyer trust each other.

A QoE allows the seller to show they have confidence in their financial statements as they have hired and paid for an independent third party to analyze and provide a written report about the recent financial performance of the business.  This offering of trust, then allows the buyer and seller to build a relationship to see if buying the business is right for the buyer and the right exit strategy for the seller.

For a QoE to be accurate and relevant, a Certified Analyst prepares a set of financial statements of a business from the last 2 full years of operation, so it presents an accurate statement of EBITDA.

Free sample reports

What is a Quality of Earnings Report (QoE)

A Quality of Earnings Report (QoE) is a certified document or report that is prepared by a credentialed analyst that validates the past financial performance of a privately held business that is typically looking to have a change of ownership.

To view the Table of Contents of a sample QoE report, click here.

Who wants a QoE?

A QoE is typically a request from a business owner that plans to sell their business and wants to present their business to potential buyers as strongly as possible.

For obvious reasons, a buyer making an investment to buy a privately held business is nervous about the quality of the financial statements. Equally, if a buyer needs to get third-party finance, the lender wants to know the quality of the financial statements is sound so they have confidence the buyer can repay their loan.

A QoE is not an Audit.

A QoE is NOT an audit. If you require an audit, seek the services of a licensed CPA.

What does a QoE include?

QoE gives buyers, investors, lenders, and brokers something to rely on beyond self-reported financials.

What is critical to a QoE is that an analyst with the right credentials prepares the report and includes a careful analysis of historical revenues and expenses, sales, major customer concentrations, and expense add-backs.

A QoE includes but is not limited to:

  • Executive summary
  • Cash Proofing Of One Account
  • Business Nature And History Summary
  • Accounts Receivable Aging Analysis
  • Financial Statement Analysis Of The Business
  • Financial Versus Tax Return Analysis
  • Financial Adjustments Review
  • EBITDA analysis
  • Sales Analysis
  • Fraud Detection Based On The General Ledger
  • Vendor Analysis
  • Labor & Salary Analysis
Who prepares the QoE?

A QoE is the product of an accredited analyst.

Your QoE is prepared by a Master Analyst in Financial Forensics (MAFF) and Certified Valuation Analysis (CVA.) This is to ensure the report is to the highest standards. These credentials are administered by NACVA or the National Association of Certified Valuators and Analysts.

What documents are required for a QoE?

The initial documents required are historical annual financial statements (Profit & Loss and Balance Sheet) for the full last 2 years with a yearly comparison in one Excel worksheet. Additionally, if it applies, interim financials by month, are also in one Excel worksheet.

It’s not unusual to have an initial request for documents and then, as the analyst starts working on their report, ask for supporting documents specific to how the financial statements are prepared for the business owner and management.

When you are ready to request a QoE, we will enter into a contract with you with an Engagement Agreement.

To see the Table of Contents of a sample QoE report, click here.

What does it cost for a QoE?

The investment in a QoE varies according to the size of the business or its Gross Revenue.

You are welcome to contact us for more information.

Who pays for the QoE?

Paying for a QoE can be a negotiation between the seller and the buyer but it’s normal for the seller to cover most if not all the cost.

The reason for this is that the buyer has no knowledge of the quality of the financial statements and like most of the representations of the seller, accepts them to be true unless the buyer finds out otherwise.

To add to this point, if the seller expects the buyer to pay for the cost of the QoE, it can worry the buyer that the seller doesn’t believe in the quality of the financial documents.

How long does it take to prepare a QoE?

The typical turnaround of a QoE is approximately 6 weeks, but it can be rushed for an additional fee.

How do I get started with a QoE?

The place to start if you want to have a QoE is to get answers to your questions.

If you would like to schedule a call, click this link.  This will allow us to understand the purpose of your QoE and answer your questions.

Once you are ready to request your QoE, we will provide you with an Engagement Agreement to review, complete, and return to us.

How do I learn more?

If you are ready to start, click this link to complete a short questionnaire and see if we are a good fit to work together.

Certified Machinery and Equipment Appraiser

Andrew Rogerson; Sacramento, CA

is a business owner of 39+ years.  This includes successfully owning and operating 5 businesses.  Andrew is a Certified Mergers & Acquisition Professional (CM&AP), Mergers & Acquisition Master Intermediary (M&AMI), Lifetime Certified Business Broker (LCBB), author of 4 books, and he gives speaking presentations on request.

Andrew helps business owners with a business in California, value and sell their business in the Lower Middle Market or with a value from $1m to $50m.



    5150 Fair Oaks Blvd, #101-198
    Carmichael, CA, 95608-5788


    Phone: (916) 570-2674
    Fax: (916) 473-8655



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