Valuation Terms

Quality of Earnings

A financial review that checks whether reported earnings are real, repeatable, and fairly stated. Why it matters: A QoE review can confirm the seller’s numbers, uncover issues, or change the buyer’s view of valuation before closing.

Related terms

Valuation
An estimate of what the business is worth. Why it matters: Valuation is a range, not a magic number, and it changes based on earnings quality, growth, risk, buyer type, deal structure, and market conditions.
Closing
The moment when the sale officially happens and ownership transfers. Why it matters: This term affects what must happen at closing, how money moves, and how final obligations are documented.
Seller
The current business owner who wants to sell the business. Why it matters: The seller is not just handing over ownership; they are also proving the business, answering diligence requests, negotiating risk allocation, and often helping with transition.
Buyer
The person, company, investor, or fund trying to buy the business. Why it matters: Different buyers value different things, so knowing the buyer type helps an owner understand likely questions, risks, financing needs, and negotiation style.

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