Quality of Earnings (QoE)

A quality of earnings analysis is a diligence exercise, usually run by an accounting firm, that scrutinizes a target's reported earnings to confirm they are real, recurring, and sustainable. It normalizes for one-off items, owner perks, and accounting quirks to arrive at a defensible adjusted EBITDA. Because purchase price is often a multiple of EBITDA, the QoE directly shapes valuation.