Understanding a Quality of Earnings Report in Pre-Sale Due Diligence

Conducting pre-sale due diligence is a powerful way for a seller to enhance enterprise value while minimizing unexpected challenges. A Quality of Earnings( QOE) report can help streamline this process. The enterprise value of a business is typically based on earnings before interest, taxes, depreciation and amortization( EBITDA), free cash flow, revenue, and industry and market conditions. Businesses investing in a QOE report prior to a sale may find the resulting increase in valuation often offsets the cost of the report.

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