Step 1 · Reported
Reported EBITDA
The starting point, tied straight to the issued financial statements, the general ledger, and the tax filings. A bridge that can't be reconciled can't be relied on.
Buyer-grade diligence
The EBITDA a buyer will actually pay for.
Capital Toolkit Quality of Earnings pressure-tests reported profit — is revenue real, recurring, and collectible; are the add-backs legitimate; does EBITDA become cash — and produces the reported → adjusted → normalized → supportable bridge a buyer, lender, or investor can underwrite. Built straight off your CPA-reviewed books. Use it to sell well, or to avoid overpaying.
Your Add-Backs Won't Survive Diligence.
A seller hands over an adjusted EBITDA padded with add-backs: the owner's car, “one-time” costs that quietly recur, a below-market salary that hides what a real manager would cost. It looks like a strong number. Then the buyer's diligence team arrives.
They strip out the add-backs that continue after closing. They reject the ones with no invoice behind them. They deduct the cost of replacing the owner. They flag that 40% of revenue sits with one customer whose contract is up for renewal, that receivables are aging, that EBITDA isn't converting to cash. The number that survives is what the deal actually prices on — and it is often materially lower than the headline.
The working-capital peg, the debt-like items hiding off the headline debt figure, the customer concentration: each one moves price, terms, holdback, or structure. A Quality of Earnings report finds them before the other side does.
Capital Toolkit computes that whole diligence layer off the same CPA-reviewed ledger that runs your books — the bridge, the concentration tests, the cash-conversion ratios, the working-capital peg — and an analyst signs the conclusion. One pipeline from ledger to defensible number, whichever side of the table you're on.
The bridge
Reported · Adjusted · Normalized · Supportable.
A QoE doesn't accept a single EBITDA number. It rebuilds it in four steps, showing exactly where each dollar is added back or taken away — so the conclusion survives the other side's scrutiny.
Step 2 · Adjusted
Adjusted EBITDA
The seller's add-backs applied — owner perks, one-time items, discretionary costs. Every add-back is listed and sourced, not waved through.
Step 3 · Normalized
Normalized EBITDA
Only the add-backs that survive scrutiny remain. Costs that continue after closing, unsupported items, and a below-market owner salary are removed or replaced with a market cost.
Step 4 · Supportable
Supportable EBITDA
The defensible figure after true maintenance capex and the working capital the business actually needs. This is the number a buyer underwrites and a multiple gets applied to.
Every step is computed off the ledger and footnoted. The gap between the seller's headline and the supportable figure — magnified by the deal multiple — is usually the single largest number in the report.
When you need one
Six Common Triggers.
Sale preparation
Run your own QoE before you go to market. Find the weak add-backs, the concentration risk, and the working-capital drag yourself — fix what you can and defend the rest — so the buyer's diligence confirms your number instead of cutting it.
Buy-side diligence
Don't underwrite the seller's headline. Test the adjusted EBITDA, the revenue quality, and the cash conversion before the price is fixed, so the offer reflects what the business actually earns.
Lender underwriting
A lender sizing a term loan or acquisition facility needs supportable cash flow, not adjusted EBITDA. The bridge and cash-conversion analysis give the credit team a number they can defend internally.
Refinancing
Refinancing existing debt or raising a new facility turns on the same supportable-earnings question. The report packages it with the debt-like items and working-capital needs already identified.
Partner buyout
Buying out a departing shareholder or admitting a new one needs an earnings figure both sides can stand behind. The normalized bridge anchors the price without the back-and-forth over which add-backs count.
Raising capital
A growth-equity round or a strategic investor will run their own QoE. Arriving with a defensible bridge and a clean concentration picture shortens diligence and protects the valuation.
How it works
From ledger to signed conclusion.
Engagement length: two to four weeks. Cleaner books and longer history make it faster, because the analytical layer is computed off the ledger rather than rebuilt by hand.
Define the scope
Sell-side or buy-side, the transaction context, the periods under review, and the standard the conclusion has to meet. Captured in the engagement letter.
Build the bridge
The engine reads the CPA-reviewed ledger and computes reported → adjusted → normalized → supportable EBITDA, testing every add-back for support and whether it continues after closing.
Run the checklist
Revenue quality, customer concentration, working-capital peg, debt-like items, and cash conversion are tested against a 750-point checklist. The report surfaces the findings that actually move price.
Sign the report
The analyst reviews every finding, applies judgment, and signs the written report. PDF deliverable with the bridge, the findings, and the supporting detail — ready for the buyer, lender, or investor.
What's inside
The work product, not just a number.
EBITDA bridge
Reported → adjusted → normalized → supportable, every step sourced and reconciled to the statements, the GL, and the tax filings.
Add-back validation
Each add-back tested: supported by documentation? Continues after closing? Below-market owner pay replaced with a market cost. The ones that don't survive are removed.
Revenue quality
Is revenue real, recurring, and collectible — trend, sustainability, deferred-revenue and customer-deposit exposure, and whether growth is durable or a one-off.
Customer concentration
Top-customer and receivable concentration, related-party revenue, and the renewal and transfer risk that decides whether revenue survives a change of ownership.
Working-capital peg
The net working capital the business actually operates on, benchmarked to a normalized trailing average — so the seller can't strip working capital before closing.
Debt-like items
Deferred revenue, customer deposits, accrued obligations, and other items that reduce enterprise value in a cash-free / debt-free deal but hide off the headline debt figure.
Cash conversion
The single most important QoE test: does EBITDA become cash? Operating-cash-flow and free-cash-flow conversion, plus maintenance-capex adequacy.
750-point checklist
A comprehensive review tests against the full universe and reports the twenty to sixty findings that actually move price, risk, lending, or deal structure.
Audit trail
Every adjustment, finding, and assumption captured on the platform. Reproducible years later if a buyer, lender, or counterparty comes back to it.
Who it's for
Built for the number a deal turns on.
Business owners
You're preparing to sell, raise, or recapitalize. Run your own QoE first so the buyer's diligence confirms your number instead of cutting it — and so you fix the concentration, working-capital, and add-back issues on your timeline, not theirs.
Buyers, PE & lenders
Test the seller's adjusted EBITDA before the price is fixed. The bridge, the revenue quality, the cash conversion, and the debt-like items give you a supportable number to underwrite — and the leverage to re-price or restructure when it doesn't hold.
CPAs & advisors
Run your QoE practice on the same platform that holds the client's books and FP&A. The heavy analytical layer is computed off the ledger, so your time goes to judgment and the signed conclusion — not spreadsheet assembly.
Honest status
What's shipped and what's next.
The Quality of Earnings engine is live: the EBITDA bridge, the add-back validation, the revenue-quality and concentration tests, the working-capital peg, the debt-like and cash-conversion analysis, and the 750-point findings checklist all compute directly off the CPA-reviewed ledger. The analyst reviews the findings, applies judgment, and signs the report. Deeper industry-specific automation is on the roadmap.
Live today
- Reported → adjusted → normalized → supportable bridge.
- Add-back validation with support and continuity tests.
- Revenue quality, trend, and customer concentration.
- Working-capital peg vs normalized trailing average.
- Debt-like items and cash-conversion analysis.
- 750-point findings checklist and signed PDF report.
On the roadmap
- Expanded industry-specific finding overlays.
- Benchmarked add-back and margin comparables.
- Direct price-volume and product-mix from invoice detail.
- Monthly-cohort revenue retention and churn.
- AI-assisted findings narrative draft.
- Buyer-ready data-room export.
Note:A Quality of Earnings report is a deal-diligence work product, not an audit or a review engagement. It is built on the books and records made available and the analyst's judgment; it does not express an audit opinion.
What sits around a Quality of Earnings
Earnings quality is one layer of a deal.
A QoE depends on the inputs that flow into it — a clean ledger, certified statements, a credible projection — and feeds the modules that price and close the deal. The modules below either supply the data the bridge is built on or consume its supportable-EBITDA conclusion. Engagements often run two or three together.
The Books
The QoE engine reads straight off the CPA-reviewed general ledger. A clean ledger is what lets the bridge, the concentration tests, and the cash-conversion ratios compute instead of being rebuilt by hand.
See module →Financial Statements
The bridge reconciles to the issued statements. Compilation, review, or audit-grade financials are the basis the supportable-EBITDA conclusion is tied back to.
See module →FP&A
The working-capital, revenue-quality, and concentration analytics the QoE draws on are the same engine that powers FP&A. The forecast quality a buyer questions is tested here.
See module →Valuation
Supportable EBITDA is the number a multiple gets applied to. A defensible QoE is what makes the valuation conclusion hold up under a buyer's scrutiny.
See module →Mergers & Acquisitions
QoE is the analytical core of a transaction. Buy-side and sell-side support runs on the same bridge, the same findings, and the same supportable number that anchors the negotiation.
See module →Private Equity
Institutional buyers run their own QoE before the term sheet. Arriving with a defensible bridge and a clean concentration picture protects the price and shortens diligence.
See module →
Questions people ask first.
Know the real number before the other side does.
Twenty-minute demo. Bring the deal that's driving it — a sale, an acquisition, a raise, a refinancing — and we'll walk through the bridge and the findings on your own numbers.
Don't have a CPA on the platform yet? Sign up directly — your engagement is temporarily held by a qualified professional on the platform until you bring in your own.