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Quality of Earnings

Revealing & Precise Quality of Earnings Reports

During high-level mergers and acquisitions, net income can only tell us so much. For both buyers and sellers, a clearer picture of profitability emerges when examining earnings before interest, taxes, depreciation, and amortization (EBITDA). As a potent form of financial due diligence, a quality of earnings analysis (QOE) can help a seller make a powerful case or guide a buyer to a fuller understanding of a company’s potential.

 

While numerous forms of assurance exist, a QOE report presents another angle of investigation and reassurance during any mergers and acquisitions due diligence process. The expert CPAs at Haynie & Company are proud to offer quality of earnings service throughout the nation. Here’s what you can expect.

The Primary Benefits of a Quality of Earnings Report

 

Traditionally, sellers elect for a QOE report before buyers begin their own financial due diligence. Buyers, meanwhile, may opt for a QOE to review preliminary financial statements provided by the seller. In both instances, a quality of earnings analysis reveals both short-term value and long-term potential, illustrating the strength of numerous revenue streams for utmost transparency. Naturally, for both parties, this service can provide a wealth of benefits.

Discover & Address Accounting Issues

For both buyers and sellers, finding and addressing accounting issues beforehand can increase trust, confidence, and transparency.

Streamline
Transactions

Regardless of which side you’re on during a merger or acquisition, having strong answers to likely questions can only speed up the process.

Boost
Credibility

Third-party CPAs lend confidence-boosting credibility to any transaction. The more all parties feel assured and positive, the better.

Maximize the
Process

Quality of earnings reports identify both problems and opportunities for all parties, affecting the process and even the valuation.

Assigning Value to Companies & Revenue Streams

While every revenue stream is valuable, some are more valuable than others. Recurring, cash-based transactions are preferable to one-time transactions and those made on credit. Other metrics can also affect the value of revenue. Debt or debt-like items can impact future earnings while a loss of key customers over the last 12 months affects perception and performance. A quality of earnings analysis can reveal these issues, allowing both buyers and sellers to act in good faith and to the benefit of all involved.

Quality of Earnings Report FAQs

What’s the difference between an audit and a quality of earnings report?

There are numerous differences between QOE reports and audits, but both are forms of financial due diligence. While some audits are performed internally, the majority are conducted by independent, third-party assessors. Quality of earnings reports are assembled on behalf of a buyer or seller and can be tailored to achieve certain aims outlined by the hiring party.

 

Additionally, an audit will review financial statements for a holistic picture of a company’s financial fitness. Quality of earnings reports can focus on other, key performance indicators to illustrate both past profitability and future potential. To understand the difference between audits and quality of earning reports, contact Haynie & Company today.

What’s included in a quality of earnings report?

Quality of earnings reports can be customized to reveal precise data points during mergers and acquisitions. Typically, you can expect your QOE report to include:

 

  • An executive summary
  • A statement of revenue streams by category
  • Income statement analysis
  • Working capital analysis
  • EBITDA summary
  • Debt assessment
  • More

Who pays for a quality of earnings report?

During a merger, acquisition, or other transaction, either party can conduct a quality of earnings report. Buyers are slightly more likely on average to engage a CPA firm like Haynie & Company for QOE reports, but both parties benefit mightily from this and other forms of financial due diligence.

UNDERSTAND REVENUE & BUILD CONFIDENCE WITH QOE REPORTS

 

Whether you’re buying, selling, or just getting your ducks in a row, a quality of earnings report from the expert CPAs at Haynie & Company can make all the difference. With an audit, you’ll know what you’re paying for. But with a quality of earnings analysis, you’ll know that you’re making a worthwhile decision that leverages both your current and future success.

 

Since 1960, we’ve helped businesses like yours make optimal decisions when buying or selling. To arrange for a QOE engagement, contact Haynie & Company today.

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