Quality of Earnings
A Quality of Earnings (QoE) report is a comprehensive analysis of a company's financial performance, aiming to evaluate the reliability, repeatability, and sustainability of its reported earnings. It examines various components of the company's financials, shedding light on factors that could affect the accuracy and quality of the reported earnings.
Another objective of a QoE report is to determine whether a company's earnings truly reflect its underlying operational performance or if they are influenced by temporary or non-recurring factors.
Since many business sales are valued based on multiples of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), QoE reports often focus on the EBITDA calculation as the key indicator of earnings.
The KROST QoE report typically includes the following components:
The findings of a QoE report provide valuable insights for buyers and their advisors, enabling them to better understand the quality and sustainability of a company's earnings. This, in turn, helps them make more accurate valuations and informed investment decisions. The KROST QoE report goes beyond the surface-level numbers in financial statements, highlighting areas of concern or opportunities for improvement.