A Quality of Earnings (QoE) report evaluates how much of a company’s reported earnings are recurring, supportable, and likely to continue after a transaction. The analysis typically reviews adjusted EBITDA, cash activity, revenue quality, working capital, customer concentration, and other factors that may affect valuation, financing, or deal structure. This is specifically designed for buyers, sellers, lenders, acquisition entrepreneurs, and business owners navigating financially significant transactions.

 

Quality of Earnings Built Around Your Deal

From smaller acquisitions to complex, multi-entity transactions, our Quality of Earnings engagements are scoped around the size and complexity of the deal, with fixed fees confirmed before work begins.

Standard
Starting at
$12,500

Generally suited for a single-entity acquisition with a purchase price of approximately $5 million or less and financial records maintained within a single accounting system.

Earnings and Proof of Cash

Scope may include:

  • Proof of cash analysis reconciling bank activity to financial statements and available tax records
  • Adjusted EBITDA analysis with supporting documentation for identified adjustments
  • Review of owner compensation, related-party transactions, and customer concentration
  • Normalized earnings analysis to support acquisition and financing considerations
Estimated timeline: approximately 3–4 weeks
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Core
Starting at
$22,500

Generally suited for transactions involving one to three entities and purchase prices of approximately $5 million to $10 million, particularly where additional diligence may be required.

Diligence and Databook

Scope may include Standard-level procedures, plus:

  • Month-by-month earnings analysis across the periods reviewed
  • Working capital trends and debt or debt-like item schedules
  • Receivables and payables aging analysis, including DSO and DPO
  • Source-linked Excel databook and key findings or red flag summary
Estimated timeline: approximately 4–5 weeks
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Comprehensive
Pricing
Varies by Scope

Designed for larger or more complex transactions where deal size, entity structure, financial complexity, or requested support requires a more tailored scope of work.

Diligence and Deal Support

Scope may include Core-level procedures, plus:

  • Working capital analysis and net debt bridge considerations
  • Review of unrecorded liabilities, contracts, leases, and commitments
  • Fixed asset rollforward and sustaining capital expenditure analysis
  • Transaction-related financial support and lender coordination, as applicable
Estimated timeline determined during scoping
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How Pricing Is Determined

Final pricing is based on the size and complexity of the transaction, the quality and availability of the financial records, and the level of diligence and transaction support required.

1

Scoping Discussion

We discuss the transaction, financing requirements, entity structure, timeline, and expected scope of the QoE engagement.

2

Provide Financial Information

Our team reviews the available financial records, data room, accounting system access, and other information needed to define the engagement.

3

Receive Your Proposal

Once the required information is received and reviewed, we provide a defined scope, estimated timeline, deliverables, and engagement fee.

Pricing Note: Starting prices are estimates and may vary based on deal size, transaction complexity, number of entities, financial record quality, requested procedures, timing, and support required. Final scope, deliverables, timeline, and fees will be confirmed in the engagement letter.

Scope by Engagement

Compare the procedures generally included within each engagement level. Final procedures and deliverables are determined by the transaction, available financial information, and agreed-upon scope.

Procedure Standard Starting at $12,500 Core Starting at $22,500 Comprehensive Pricing Varies by Scope
Cash and Earnings
Proof of cash analysis reconciling bank activity to financial statements and available tax records ● ● ●
Proof of cash covering trailing twelve months and prior fiscal periods, as applicable ● ● ●
Tax transcript and filed-return comparison to available financial records ● ● ●
Adjusted EBITDA analysis with supporting documentation for identified adjustments ● ● ●
Review of owner compensation and related-party transactions ● ● ●
Normalized earnings analysis to support financing and debt-service considerations ● ● ●
Revenue and Margin
Revenue, gross margin, and pricing trends ● ● ●
Customer concentration, contract continuity, and margin sustainability ● ● ●
Month-by-month earnings analysis ○ ● ●
Run-rate, pro forma, and accounting policy review ○ ● ●
Working Capital and Debt
Working capital trend analysis ○ ● ●
Debt and debt-like item schedules ○ ● ●
Receivables and payables aging, including DSO and DPO ○ ● ●
Working capital peg and net debt bridge analysis ●
Balance Sheet and Risk
Fixed asset rollforward, sustaining capital expenditure, and deferred maintenance analysis ○ ●
Review of unrecorded liabilities, contracts, leases, and commitments ●
Deliverables
Written Quality of Earnings report and findings discussion ● ● ●
Key findings and red flag summary ● ● ●
Source-linked Excel databook ○ ● ●
Management interviews with the seller, as needed ○ ● ●
Transaction-related financial support and lender coordination, as applicable ●
● Included in typical scope ○ Limited or summary scope Final procedures depend on the agreed-upon engagement scope.

Additional Scope Available

  • Working capital peg and purchase agreement support May be included in comprehensive engagements
    Scoped separately
  • Tax diligence and exposure review
    Scoped separately
  • Transaction structure and tax modeling
    Scoped separately
  • Forward projections and pro forma modeling
    Scoped separately
  • Additional entities beyond the agreed scope
    Based on complexity
  • Sell-side / Vendor Quality of Earnings
    Scoped separately
  • Accelerated delivery
    Subject to availability
Additional procedures are scoped and priced separately when they fall outside the agreed-upon engagement.
Scope Notice: The information above illustrates common engagement structures. Final procedures, deliverables, timing, and fees are based on the transaction and will be confirmed in the engagement letter.

FAQs about quality of earnings

  • A Quality of Earnings report analyzes a company's financial performance to help determine how much of its reported earnings are accurate, recurring, and sustainable. It can also identify adjustments, unusual expenses, and potential financial risks. A Quality of Earnings review is often part of the broader financial due diligence process involved in buying a business.

  • A Quality of Earnings (QoE) review examines a company's financial performance to help buyers and investors better understand its earnings and potential financial risks. The analysis typically includes reviewing revenue and expense trends, evaluating adjustments to reported earnings, assessing cash flow, and identifying factors that could affect the company's financial position.

    A QoE review provides valuable financial insights to help buyers make informed decisions during the acquisition process.

  • The required QoE must be completed by an independent financial professional for the benefit of the lender, rather than by the buyer or seller.

  • Lenders will use the earnings determined through the QoE when evaluating qualifying transactions. If normalized earnings differ from the figures originally presented, it could affect debt service coverage, financing structure, or other aspects of the deal.

  • Under the new SBA requirements, the required QoE must be performed by an independent, experienced financial professional for the lender's benefit. A report prepared by or for the borrower or seller cannot satisfy that requirement. Buyers should coordinate with their lender regarding the specific requirements for their transaction.

  • The cost of a Quality of Earnings report depends on the size of the business, complexity of its financial records, transaction structure, and scope of the analysis. Cooper CPA Group evaluates each engagement individually to determine an appropriate scope and provide pricing based on the transaction's needs.

  • When selecting a Quality of Earnings provider, business buyers should consider the firm's transaction experience, professional credentials, understanding of financial due diligence, and ability to identify potential risks. Working with an experienced CPA advisory team can help buyers better understand a company's financial performance before completing an acquisition.

  • The Quality of Earnings engagement process typically begins with an initial consultation to discuss the transaction, financial reporting needs, and scope of the analysis. Once the engagement terms are established, the team begins collecting and reviewing relevant financial documents.

    The process generally includes financial due diligence, analysis of earnings and cash flow, and preparation of findings to help buyers better understand the financial health of the business before completing an acquisition.

LET'S TALK ABOUT YOUR TRANSACTION

Every business transaction comes with important financial considerations. Whether you're a buyer, seller, or SBA lender, our team can help you better understand the numbers behind the deal. Contact us today to get started.