Quality of Earnings Report

Strike the Right Price with a Quality of Earnings Report

Achieve financial transparency and make well-informed decisions with our comprehensive Quality of Earnings reports. Let us use our operational expertise to help you defend your price.

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For a Seller: Identify Potential Risks & Uncover Negotiation Opportunities

A Quality of Earnings report offers a comprehensive and transparent view of your company’s earnings. This detailed analysis goes beyond standard financial statements, highlighting potential areas of exposure and opportunities for optimal negotiating points.

By presenting an accurate and credible financial picture, we provide insights (both positive and negative), enhance the seller’s negotiating position, and potentially lead to a more favorable sale outcome. Our operational experience allows us to take a deeper look at the underlying reasons within the report, which can lead to better outcomes.

For a Buyer: Prevent Surprises & Proactively Address Potential Issues

A Quality of Earnings report is invaluable for a potential transaction as it provides a deep dive into the company’s sustainability and the quality of the acquisition's earnings. It is a key tool to ensure a transparent, informed acquisition process by minimizing surprises and shining a light on a company’s financial stability and sustainability. A Quality of Earnings report also reveals underlying trends and potential issues not visible on the surface.

This invaluable insight helps the buyer assess the investment's actual value and potential risks, aiding in informed decision-making and effective negotiation. Our years of operational experience lead to a deeper understanding of what the numbers tell the reader.

Experienced Fractional CFO Services

We are the pioneers in providing fractional CFO services, allowing clients to benefit from comprehensive and deeply experienced financial management without taking on a full-time CFO.

This approach ensures that you can access a slice of top-tier financial expertise tailored to your needs, helping you efficiently achieve your business objectives.

Collaborative Partnership Approach

We believe in fostering collaborative partnerships and working closely with clients to understand their goals and challenges.

Our flexible engagement model allows our services to adapt to the evolving needs of our clients in the dynamic landscape of M&A, providing continuous support and strategic guidance.

We Are More Than a Transaction Advisory or Consulting Firm

Real-World Operational Experience

Our team consists of former operating CFOs with hands-on experience in various industries, giving us a deep understanding of operational nuances and industry-specific challenges.

Industry-Specific Insights

With backgrounds across diverse industries, we bring unparalleled insights into each sector's unique dynamics, identifying inefficiencies and compliance gaps often overlooked by traditional advisors.

Strategic EBITDA Adjustments

Unlike traditional Big 4 advisors or transaction advisory specialists, our operational experience allows us to identify strategic EBITDA adjustments.

In-Depth Understanding of Business Operations

Our experience in running companies provides a deep understanding of the interplay between financial management and operational efficiency, uncovering hidden opportunities for improvement beyond financial statements.

Risk Mitigation and Compliance Expertise

We excel in identifying potential vulnerabilities and compliance issues, proactively addressing these concerns to mitigate risks, and ensure smoother transactions with enhanced due diligence processes.

Tailored Solutions for Each Industry

Recognizing each industry's unique challenges and opportunities, we tailor our approach to each client's specific needs, ensuring recommendations are relevant, actionable, and aligned with industry best practices.

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Gene Cernan,

Astronaut

Enhancing business valuation

Aligning Owner Perception with Market Realities

in-depth article 6 Min Read

After years spent pouring their life’s work into building a business, an owner invariably forms a perception of its worth. Yet, this perception often differs from the view of the market. Owner’s opinions of their business value can be influenced by…

Frequently Asked Questions

What is a Quality of Earnings (QoE) assessment?

A Quality of Earnings (QoE) assessment is a detailed analysis of a company’s financial statements to determine the sustainability and accuracy of its earnings. This assessment helps identify any adjustments that need to be made to reflect the true economic performance of the business.

Why is a QoE assessment important?

A QoE assessment is crucial because it provides a clear picture of a company's financial health and performance. It helps buyers and sellers make informed decisions by highlighting any financial irregularities, ensuring transparency, and reducing the risk of unexpected issues during a transaction.

How long does a QoE assessment typically take?

The duration of a QoE assessment can vary depending on the complexity and size of the business. Generally, it takes between 2 to 6 weeks to complete a thorough assessment.

What is a Sell-Side Quality of Earnings (QoE) assessment?

The seller conducts a sell-side QoE assessment to prepare for a business sale. It aims to present a clear and accurate picture of the company’s financial performance, proactively address potential buyer concerns, and help maximize the sale price.

How does a Sell-Side QoE benefit the seller?

By conducting a Sell-Side QoE, sellers can identify and address any financial discrepancies before entering negotiations, making their business more attractive to potential buyers. This helps build trust and can lead to a smoother, faster transaction process.

What should a seller expect during a Sell-Side QoE assessment?

During a Sell-Side QoE, the assessment team will review financial statements, conduct interviews with key personnel, analyze revenue and expense trends, and identify any one-time or non-recurring items that could impact earnings. The goal is to ensure the financials presented to potential buyers are accurate and reliable.

What is a Buy-Side Quality of Earnings (QoE) assessment?

A Buy-Side QoE assessment is performed by the buyer to evaluate the financial health and earnings quality of a potential acquisition target. It helps buyers understand the target company's true economic performance and identify any risks or issues that may affect the transaction.

How does a Buy-Side QoE benefit the buyer?

A Buy-Side QoE provides the buyer with an in-depth understanding of the target company's financial condition, ensuring that the purchase price is justified and that there are no hidden financial risks. It can also uncover opportunities for post-acquisition improvements.

What should a buyer expect during a Buy-Side QoE assessment?

During a Buy-Side QoE, the assessment team will analyze the target company’s financial records, validate revenue and expense items, assess working capital and cash flow, and identify any adjustments needed to present an accurate financial picture. The process includes thorough due diligence to ensure the buyer is making a well-informed investment.

What key areas are analyzed in a QoE assessment?

Key areas typically analyzed in a QoE assessment include revenue recognition, cost of goods sold, operating expenses, working capital, cash flow, and any one-time or non-recurring items. The goal is to assess the sustainability and accuracy of the reported earnings.

What documents are needed for a QoE assessment?

Documents typically required for a QoE assessment include financial statements (income statement, balance sheet, cash flow statement), general ledger, tax returns, management accounts, sales records, expense reports, and any relevant contracts or agreements.

How does vcfo conduct a QoE assessment?

vcfo’s approach to QoE assessments involves a thorough review of financial documents, interviews with key personnel, detailed financial analysis, and the identification of any adjustments needed to reflect the true economic performance of the business. We provide a comprehensive report outlining our findings and recommendations.

Can a QoE assessment uncover potential risks?

Yes, a QoE assessment can uncover potential financial risks, such as revenue recognition issues, expense misclassifications, or non-recurring items that may distort earnings. Identifying these risks early can help in making more informed decisions during a transaction.

How much does a QoE assessment cost?

The cost of a QoE assessment can vary based on the size and complexity of the business. At vcfo, we offer competitive pricing tailored to the specific needs of our clients. Contact us for a detailed quote based on your requirements.

How can I get started with a QoE assessment from vcfo?

To get started with a QoE assessment, simply contact our Transaction Advisory Support team. We will schedule an initial consultation to discuss your needs and provide a customized proposal outlining the scope, timeline, and cost of the assessment.