Quality of Earnings (QoE)
Private Equity glossary · Valuation, Diligence, & Value Creation
Definition
A diligence workstream adjusting reported earnings to reflect normalized, recurring profitability.
Quality of Earnings (QoE) in plain English
When someone wants to buy a company, they can't just trust the profit number the seller shows them — sellers naturally make things look as rosy as possible. A Quality of Earnings study is the buyer's detective work: accountants dig through the books to figure out how much profit the business REALLY earns in a normal, repeatable year. They strip out one-time flukes (a lucky lawsuit win, a huge order that won't happen again) and add back things that were unfairly hidden, so the buyer pays for the true, steady earning power — not a number dressed up for the sale.
Also called: QoE
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