Quality of Earnings (QoE)
An independent accounting review that tests whether reported earnings are real, sustainable and correctly adjusted.
In more detail
A Quality of Earnings report, or QoE, is commissioned by a buyer, and increasingly by a seller before going to market. It goes deeper than an audit on the questions that matter to a transaction: are revenues recognized correctly, are the add-backs legitimate, is working capital normal, is there anything one-time being treated as ongoing. A seller-side QoE done early removes the buyer's most effective price-reduction lever.
If you are selling
Getting one before going to market costs money and usually saves more, because it settles the earnings argument on your terms.
If you are buying
It is the check on everything the CIM claims. Budget for it and start it early.
Related terms
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Wondering what your business is actually worth?
An Estimate of Value is prepared by an analyst, not a calculator, and gives you a number you can plan around.
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