Valuation Advisor

A Quality of Earnings (QoE) analysis evaluates the reliability, sustainability, and cash-flow characteristics of a company's reported earnings. BVA examines EBITDA and SDE adjustments, revenue quality, cash activity, working capital, capital expenditures, and transaction risks. The objective is to identify financial performance that is supported by available evidence rather than simply accepting seller-reported earnings.

Quality of Earnings evaluates the financial performance and adjustments underlying a transaction. A business valuation determines a supportable conclusion of business or ownership-interest value using appropriate valuation approaches. These services are complementary: QoE helps assess sustainable earnings, while valuation evaluates their economic value in light of relevant risks, market evidence, and financial assumptions. Explore BVA's acquisition valuation services.

BVA reviews proposed adjustments against supporting records and evaluates whether expenses are genuinely nonrecurring, discretionary, owner-specific, or necessary to sustain operations. Owner compensation and replacement-management requirements are considered where applicable. Adjustments may increase or decrease normalized earnings, and material unsupported or unresolved items are identified rather than automatically accepted.

No. BVA's QoE engagements are financial due diligence and consulting assignments, not audits, financial-statement reviews, examinations, or assurance engagements. Procedures are tailored to the agreed scope and available evidence. Findings, assumptions, limitations, and unresolved financial issues are documented for the intended users.

Proof of Cash compares accounting records with business bank activity and other financial evidence to evaluate reported receipts and disbursements. BVA may identify financing proceeds, transfers, owner contributions, timing differences, and unexplained transactions that should not automatically be classified as operating revenue or expenses. Explore our Proof of Cash analysis.

Depending on the business and engagement scope, BVA evaluates customer-level revenue, recurring versus nonrecurring sales, customer retention, gross margins, seasonality, and changes in the revenue mix. Concentration risks, unusual trends, and reliance on key customers or sales channels may affect sustainable earnings, valuation assumptions, and acquisition financing.

BVA may analyze accounts receivable, inventory, accounts payable, accrued expenses, customer deposits, debt-like obligations, and related-party balances. The analysis can help identify normalized working-capital requirements, potential purchase-price adjustments, and additional post-closing liquidity needs. When records do not support a conventional working-capital peg, alternative operating cash-reserve analysis may be appropriate.

EBITDA does not equal cash available to a buyer or lender. BVA evaluates operating cash conversion, recurring capital expenditures, equipment replacement requirements, and working-capital demands. These analyses help distinguish accounting earnings from cash flow available for debt service, distributions, and reinvestment.

Yes. BVA can analyze selected historical periods using available financial statements, tax returns, general-ledger records, bank activity, and supporting information. Retrospective analysis may assist with transaction reviews, litigation, ownership disputes, and reconstruction of historical earnings. Later-acquired information is distinguished from evidence available during the period being analyzed.

Yes. Buy-side QoE supports purchasers, investors, and lenders evaluating financial performance and transaction risks. Sell-side analysis helps owners prepare financial information, evaluate potential buyer questions, and identify issues before marketing a business. For purchasers requiring coordinated QoE, independent valuation, and financing analysis, explore BVA's Acquisition Decision Package.

For full-scope small-business diligence, BVA commonly begins with approximately 24 months of financial records, including financial statements, accounting detail, and statements for all relevant business bank and credit-card accounts. Tax returns, payroll information, customer data, debt schedules, working-capital detail, and documentation supporting seller adjustments may also be required. The final request is tailored to the assignment.

Timing depends on the transaction scope, business complexity, quality of the accounting records, number of entities and accounts, and availability of supporting documentation. A focused QoE generally requires less time than a multi-entity engagement involving extensive Proof of Cash or financial reconstruction. BVA establishes an anticipated timeline after reviewing the proposed scope and records.

Yes. Earnings-quality findings may assist in assessing normalized cash flow, debt-service capacity, working capital, and transaction risks. However, lender-directed assignments can have separate engagement, independence, reliance, and reporting requirements. A buyer-commissioned QoE is not automatically acceptable for SBA underwriting. Review BVA's SBA valuation and lender-directed QoE services.

Begin with a confidential consultation covering the target business, transaction stage, intended users, financing considerations, available financial records, and anticipated deadline. BVA can then recommend an appropriate scope and provide a written proposal, expected deliverables, and tailored document request. Schedule a consultation with BVA.