Quality of Earnings Review

Specially trained and experienced members of the Pursant financial consulting team perform a review, analysis and re-presentation of  your company’s historical financial/accounting information. The overarching objective is to provide vetted, defensible financial information in a “buyer ready” format to facilitate (i) the development of the sale transaction marketing materials and subsequently (ii) efficient Buyer’s financial/accounting due diligence.

A Quality of Earnings (QOE) report is designed to analyze the individual components of a company’s earnings (revenue and expenses). This analysis is designed to:

  • Confirm the accuracy of reported earnings
  • Determine whether earnings are sustainable
  • Identify potential financial risks that could affect the company
  • Estimate how much cash flow a company is likely to generate for investors

Examples of issues that a QOE report might uncover include:

  • Deficient accounting policies and procedures,
  • Excessive concentration of revenue with one customer,
  • Transactions with undisclosed related parties,
  • Inaccurate period-end adjustments,
  • Unusual revenue or expense items,
  • Insufficient loss reserves, and
  • Overly optimistic projected financial statements.

Pursant typically performs QOE reviews pre Letter of Intent, post Letter of Intent or in advance of a contemplated sale transaction. Through our network of subject matter experts, we can also perform tax and information technology diligence.

We tailor our approach and procedures to meet your needs.