How to Find Quality in a ‘Quality of Earnings’ Report
Quality of earnings reports are about transparency and trust.
Mainebiz recently published Scott McKenzie as a guest columnist. His article How to find quality in a ‘quality of earnings’ report discusses the concept of a Q0E report, a due diligence step provided by an independent third party.
“Buyers looking to acquire a company need solid, accurate and reliable data to make the most informed decisions possible about the business they are targeting. This is always true, but today, with an uncertain economic picture both in the U.S. and abroad, it’s more crucial than ever. This is where a QoE comes in. QoEs, which are provided by an independent third party, can provide important information about an organization’s finances and tax compliance.
Every number in a company’s transaction ledger tells a story. A QoE is a way of contextualizing those stories so a buyer knows which stories are established recurring costs for the business and which won’t necessarily be factors for the way a new owner/operator will plan on operating the business in the future.
The goal of a QoE is to give all parties, particularly the buyer, an accurate picture of the day-to-day financial investment of running the business. It can help potential buyers review and assess the financial areas to guide decision-making with a potential investment or acquisition decision.”
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