QUALITY OF EARNINGS
QUALITY OF EARNINGS
Quality of Earnings (QoE) Report
Quality of Earnings (QoE) is a crucial aspect of M&A due diligence focused on evaluating a target company’s financial health. CKH Group can prepare an unbiased QoE report and analyze target company’s financials to better understand its historic earnings and the potential for future performance.
As a leading CPA firm based in Atlanta, we take pride in offering QoE Services designed to:
- Analyze historical operating results and working capital needs
- Evaluate the “quality” and sustainability of a company’s earnings and normalized earnings (“adjusted EBITDA”), propose adjustments
- Review the revenue and perform a proof of cash reconciliation.
- Review application of accounting policies and principles
- Analyze customer concertation
- Evaluate profitable vs. non-profitable product-lines
What Is a Quality of Earnings (QoE) Report?
A QoE Report is an executive summary of with business financials overview, issues and adjusted financials. To complete the report, CKH will review detailed data from target company’s financials, bank statements, ledgers, customer/vendor information, and other transaction level data. The completed report provides detailed analysis tailored to investor’s/lender’s requests, including profitability by customer and product, accurately adjusted EBITDA, Net Working Capital, adjusted financials, profitability, customers & vendors concentration and aging analysis.
Upon completion, our clients receive a comprehensive report (usually 30 pages), ready to be shared with counterparties to facilitate securing the investment or loan.
What are the benefits to a Quality of Earnings Report?
A QoE report is essential to uncover the true financial performance of a business, ensuring you make well-informed investment, acquisition, or lending decisions. It helps identify anomalies, validate earnings, and mitigate risks, giving you greater confidence and transparency throughout the transaction process.
Companies that consider buying, selling, or investing in a business are typically advised to obtain a QoE report, as this practice has become standard. The reason is simple: investors must ensure they are not misled by inaccurate earnings. Unlike audits and reviews, which focus on assessing a company’s compliance with generally accepted accounting principles (GAAP), a QoE report evaluates the quality and sustainability of the earnings.
How much time does it take to prepare a QoE Report?
We understand that time is of the essence. That’s why we have a large, experienced team ready to begin immediately. For a small to mid-sized company, we can deliver the report within 12 to 22 business days* from the date all necessary information is received. For a more accurate time range tailored to your specific businesses, please reach out for more details.
*This range is an estimate and not a guarantee or contractual obligation. For a more accurate time range tailored to your specific businesses, please reach out for more details.
How much does a QoE report cost?
Expect the cost to range from $12,000 at the low end for a minimal report for a small company to more than $100,000 for a complete report for a large firm*. The price depends on the quality and quantity of accounting records, complexity of the business and revenue. For example, a typical QoE report for company with 1 million in unadjusted EBITDA would cost around $20,000.
Also, CKH group has flexible payment terms: 50% upfront that covers a preliminary report. 50% upon delivery of the final report – due within 30 days of invoicing. If the midway preliminary report reveals critical issues and the Client chooses to discontinue, written notice (email accepted) must be sent to CKH within five business days, waiving the second payment installment.
You can receive a free quote within 24 hours by providing the target company’s accounting system details, along with its Balance Sheet and P&L statements for the past three years. Reach out to info@ckhgroup.com or contact us for more details.
*This price range is an estimate and not a guarantee or contractual obligation. For a more accurate price range tailored to your specific businesses, please reach out and we can prepare an engagement letter.
Talk to us out about QoE
Why Choose CKH Group?
CKH Group’s Accounting and Advisory services are designed to help businesses navigate the complexities of financial management in today’s dynamic economic landscape.
With CKH Group, you’re not just getting a CPA firm; you’re gaining a trusted partner committed to your success. Discover the CKH Group advantage, where excellence, integrity, and expertise come together to create a powerful accounting and advisory partnership for you. Contact us today to explore how our accounting services can add value to your organization.
