MBA Quality of Earnings

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MBA Quality of Earnings Analysis & Reports

Quality of Earnings reports or analysis are not standardized. Generally, the scope of a QE engagement in the world of privately held businesses is to pursue in a higher level of scrutiny and evaluate Financial Statements and other company information to obtain a higher level of confidence in the target company, its financial condition and its prospects for the future.

Normally the engagement will provide an additional layer of insight into the health of the company, confidence in and the sustainability of earnings that have been expressed through Internal and externally prepared Financial Statements and related information.

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Most privately held businesses who utilize external accounting firms receive their financial statements on compilation level of assurance.   Even business tax returns are prepared for the company and its stakeholders guided by compilation Financials with some minimal level of information scrutiny. Frequently, privately owned business tax returns are produced or referenced on an Income Tax Basis as opposed to GAAP Standards and rarely with third party opinion or assurances (Formal audit or Reviewed).
Illustration of a woman building a profit chart in the background

Normally it is the opposite, and Financials are without assurance, are disclaimed for accuracy assurance and used for providing accounting or tax information to an interested third party.   This often occurs in the buying and selling of a privately owned business.

Quality of Earnings Reports and Analysis can include an actual audit when larger companies or transactions are involved. The MBA Quality of Earnings Analysis and reporting does not incorporate a formal audit.

When an audit is required, we recommend a number of strategic CPA partners who provide those services- or those who are independent.   However, formal audits are rarely performed for most small to mid- sized privately owned businesses even when bought and sold utilizing SBA loans.

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The MBA Quality of Earnings Analysis and Reports are designed to fill the need for privately owned businesses in a variety of circumstances.  Normally this need occurs when a privately owned business is being bought or sold.

In many ways the Quality of Earnings analysis and reports mirror much of what occurs in an MBA Due Diligencd engagement. However there can be significant differences depending upon the need and the design of the engagement.


Quality of Earnings Reports evaluate “Bakers Dozen; Thirteen key attributes of valuable companies”

  1. Clarity and Alignment of The Business Proposition,
  2. High Accounting Standards; Accuracy of Financial Statements.
  3. Focus on sustainable profitable growth.
  4. Healthy Interdependent Relationships.
  5. Client & Lifetime Value Building Culture.
  6. Proprietary advantages, protective moats & Value Added Services.
  7. Clear corporate culture, supportive reviews and referral partners.
  8. System focused management accountability.
  9. Marketing performance and clear performance metrics.
  10. Cognizance and attention to market creation opportunities.
  11. Clarity of infrastructure and capital expense needs.
  12. Competitive position awareness and strategic defenses.
  13. Clarity of ownership exit intentions and options.

Each of these attributes and their performance analysis contribute to the Quality of Earnings Conclusions.

Every business, analysis and report is unique to the business.

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The MBA Quality of Earnings Process and Associated Reports are designed to evaluate privately owned companies who provide unaudited, or inancials not provided with a written opinion from a CPA for a variety of reasons. It is important to understand that company’s business health is measured inancially. Depending upon the industry, company and circumstances a number of inquiries and analysis may be performed to address non-inancial attributes of a irm including marketability if a business sale or acquisition is contemplated.
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