Quality of earnings (QoE)

An independent review, usually by accountants, that tests whether a company's reported earnings are accurate, repeatable and backed by cash.

Checked 9 Oct 2026 · 2 sources

What is a quality of earnings (QoE) review?

A quality of earnings (QoE) review is an independent review, usually by accountants, that tests whether a company's reported earnings are accurate, repeatable and backed by cash. It looks at one-time items, customer concentration, revenue patterns and the add-backs behind adjusted EBITDA. In a typical PE deal it comes late, after a buyer wins exclusivity, and its findings can move the price.

Why it matters to a revenue leader

A QoE puts revenue under a microscope. It asks whether top customers are steady, whether large one-time projects are inflating the year and whether reported profit turns into cash. In a services company, that means agreement revenue, renewals and backlog get traced to contracts and invoices. Clean CRM and billing data shorten the review and protect the price.

Example

Fictitious numbers

A QoE on a mechanical contractor finds that one $2.5M retrofit project drove a quarter of last year's revenue growth. The buyer treats it as non-recurring and lowers its view of run-rate EBITDA by $0.4M. At 8 times EBITDA, that removes $3.2M from the price.

The question to ask

"If an accountant traced our top 20 customers' revenue to contracts and cash, what would they find?"

Sources

  1. Quality of Earnings Report checked 9 Oct 2026
  2. Private Equity Transaction Timeline checked 9 Oct 2026

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