ShareVault Glossary

What Is a Quality of Earnings Report?

A Quality of Earnings (QoE) report is an independent financial analysis that helps buyers, investors, and lenders understand the true financial health of a business before a transaction closes.

Unlike standard financial statements, a QoE report looks beyond reported earnings to identify recurring revenue, normalize EBITDA, uncover one-time expenses, and highlight financial risks that could impact valuation or deal terms.

Quality of Earnings reports are commonly prepared during mergers and acquisitions, private equity investments, recapitalizations, and other major transactions. They provide confidence that the company’s earnings accurately reflect ongoing business performance, helping buyers make informed decisions and reducing surprises during due diligence.

Why It Matters

A Quality of Earnings report helps deal teams:

• Validate reported EBITDA and profitability
• Identify nonrecurring revenue and expenses
• Detect accounting inconsistencies and financial risks
• Support valuation negotiations
• Build buyer confidence and accelerate due diligence

For sellers, a QoE report can strengthen credibility before going to market. For buyers, it helps ensure they’re paying for sustainable earnings rather than temporary results.

When combined with a secure virtual data room like ShareVault, a Quality of Earnings report becomes easier to share, review, and manage throughout the due diligence process, helping keep transactions organized and moving forward.