A Quality of Earnings report sample shows the institutional structure of a defended EBITDA examination. It is not a spreadsheet of add-backs. It is a documented, exhibit-referenced argument that nine sections build across 40 to 80 pages, from the executive summary that states the defended EBITDA range to the findings memorandum that classifies every issue by materiality.
Across the $20M to $100M operator tier, the difference between a defended report and a reactive position is an 8 to 18 percent EBITDA defense gap. This article maps the standard sections, the eight adjustment schedules, the customer concentration and working capital analyses, the findings memorandum, how a sample differs by provider, and how the TEOL QofE Pre-Read precedes the full report.
A Quality of Earnings report sample shows the institutional structure of a defended EBITDA examination: an executive summary with defended EBITDA range, reconciliation tables, eight categories of adjustment schedules, customer concentration analysis, working capital trend analysis, run-rate adjustments, and a findings memorandum. The report typically runs 40 to 80 pages with documented supporting evidence.
The structure is consistent whether the report is prepared sell-side to defend the position or buy-side to challenge it. What a sample makes visible is the depth capital partners expect: every adjustment quantified, categorized, and tied to an exhibit. The same data examined in a full Quality of Earnings report produces a defended range, not a single figure, because a range is what survives examination.
A QofE report sample is built from nine standard sections, each with a defined purpose, a typical page span, and the exhibits it carries. Select a section to read what it documents and how many exhibits it holds. The structure is what makes the report defensible: every conclusion sits on an evidenced exhibit a reviewer can trace.
The executive summary states the defended EBITDA range and lists the material findings by significance. Capital partners read it first because it frames how every schedule that follows supports or qualifies the defended position the rest of the report evidences.
Summary bridge, findings list
| Section | Pages | Purpose | Key Exhibits |
|---|---|---|---|
| Executive Summary | 2 to 4 | Defended EBITDA range | Summary bridge, findings list |
| Reconciliation | 4 to 8 | Reported to adjusted EBITDA | Tie-out tables, walk |
| Adjustment Schedules | 12 to 20 | Category-by-category analysis | 8 detailed adjustment schedules |
| Revenue Analysis | 6 to 10 | Revenue defensibility | Customer detail, recognition treatment |
| Cost Analysis | 4 to 8 | Margin defensibility | Gross margin trend, cost categorization |
| Working Capital | 4 to 8 | Normalized WC and peg | TTM analysis, seasonality |
| Customer Concentration | 3 to 5 | Concentration risk read | Top customer, top five tables |
| Run-Rate Pro-Forma | 3 to 5 | Forward EBITDA defense | Recent event adjustments |
| Findings Memorandum | 3 to 6 | Issues by materiality | Findings table, exposures |
| Full report span | 40–80 | Defended EBITDA | 24+ exhibits |
The executive summary in a QofE report sample states the defended EBITDA range and lists the material findings by significance. It runs 2 to 4 pages and is the section capital partners read first, because it establishes the defended position the rest of the report evidences. Everything that follows either supports or qualifies the range stated here.
A defensible executive summary holds two exhibits. The first is the summary bridge that walks reported EBITDA to the defended figure at a single glance. The second is the findings list, ranked so a reader can separate the issues that move the range from the observations that do not. Where the bridge shows the destination, the findings list shows the road, and a reader who trusts the summary trusts the report. The figure it states is the same number the EBITDA Quality Calculator scores before the full report is ever commissioned.
| Executive Summary Element | Typical Depth |
|---|---|
| Defended EBITDA range stated | 1 page |
| Summary bridge exhibit | 1 exhibit |
| Material findings list | 1 exhibit |
| Total executive summary span | 2–4 pages |
The institutional methodology for reading a quality of earnings report sample, from the executive summary through the adjustment schedules, concentration analysis, working capital trend, and the defended EBITDA bridge.
Read the executive summary first, because it states the defended EBITDA range and the material findings, and it frames how every schedule that follows supports or qualifies that range.
Work through the eight category adjustment schedules, testing that each adjustment is quantified, categorized, and referenced to its supporting evidence rather than asserted.
Read the top customer and top five customer tables to read concentration risk, because concentration above institutional thresholds is a recurring source of valuation discount.
Examine the trailing-twelve-month working capital analysis and the seasonality treatment to confirm the normalized requirement the buyer will peg against is defended.
Trace the bridge from reported to defended EBITDA so every dollar of normalization is supported, then read the findings memorandum for the exceptions that qualify the range.
The adjustment schedules are the analytical core of a QofE report sample, running 12 to 20 pages with one schedule per institutional category. Each schedule documents what its category examines, quantifies the adjustment, and references the supporting evidence. There are eight schedules, one for each category capital examines.
Documents market compensation benchmarking against actual owner and family payroll, with the normalization adjustment quantified per period. Operators understate this gap in 60 to 75 percent of cases.
Documents vehicles, travel, and family services run through the business, each itemized and evidenced before it is added back. Personal expense capture is incomplete in 50 to 65 percent of operator records.
Documents litigation, restructuring, and one-time gains or losses, with the test that each is genuinely non-recurring rather than recurring under another label.
Documents pricing changes and contract wins or losses that have occurred but are not yet reflected across the trailing twelve months. Run-rate claims are unsupported in 70 to 85 percent of operator submissions.
Documents cut-off discipline, deferred revenue, and milestone treatment so reported revenue reflects earned performance rather than period timing.
Documents inventory valuation, cost of goods sold, and gross margin stability across the examination period to test whether earnings are sustainable.
Documents top customer and top five customer revenue share against institutional thresholds, which can discount EBITDA 6 to 15 percent when concentration is high.
Documents the normalized requirement, the seasonality pattern, and the peg the buyer will measure against, the single largest undefended exposure in 70 to 85 percent of cases.
The eight schedules are the same categories examined in depth across the eight adjustment categories. A schedule that asserts an adjustment without an exhibit is a schedule a buy-side reviewer reverses, which is why the documented version is the only version that defends value.
The customer concentration analysis in a QofE report sample reads concentration risk through two exhibits: the top customer table and the top five customer table. It runs 3 to 5 pages and is always examined, because concentration above institutional thresholds discounts EBITDA 6 to 15 percent regardless of how clean every other adjustment is. The analysis quantifies the share, the trend, and the contractual durability of each major relationship.
A worked structure makes the read concrete. The top customer table lists each major account by revenue share, contract length, and tenure, so a reviewer can see whether a single relationship carries the business. The top five table aggregates the same fields to read combined exposure. Where a top customer holds more than 20 percent of revenue, the report quantifies the discount mechanics rather than leaving the buyer to invent them. The same concentration read feeds the working capital and run-rate sections, because a concentrated revenue base changes both the trend defense and the forward pro-forma.
The working capital analysis in a QofE report sample documents the normalized requirement and the peg the buyer will measure against. It runs 4 to 8 pages and carries two exhibits: the trailing-twelve-month analysis and the seasonality treatment. An undefended working capital trend is one of the largest sources of post-LOI repricing, undefended in 70 to 85 percent of operator cases, which is why the section is built before the LOI rather than after.
The trend treatment is what separates a defended report from a vulnerable one. The trailing-twelve-month exhibit maps the monthly working capital pattern so the seasonality is visible rather than averaged away. The seasonality exhibit then converts that pattern into a mid-cycle requirement the buyer cannot game by timing the close. Where the Financial Truth Ladder reads how defensible the underlying numbers are, the working capital section converts that defensibility into a peg the report can carry through diligence.
The findings memorandum in a QofE report sample classifies issues by materiality and quantifies the exposure each one carries. It runs 3 to 6 pages and is the section that qualifies the defended range. A materiality classification framework separates the findings that move the range from the observations a buyer can raise but cannot reprice against.
Findings that move the defended EBITDA range, including rejected add-backs and undisclosed related-party transactions. These carry quantified exposures and drive the repricing a buyer pursues.
Findings that narrow but do not break the range, such as revenue recognition timing or cost accounting volatility. They require documentation rather than concession.
Items raised for completeness that a buyer can note but cannot reprice against, because the report already evidences and resolves them before diligence opens.
A materiality framework is what makes the memorandum useful rather than alarming. Reading findings against the Reporting Under Scrutiny Model tells the operator which exposures survive examination and which dissolve under it, so the response is calibrated to the finding rather than to the fear of it.
QofE report samples differ across Big Four firms, BDO and UHY, and specialized transaction advisory firms. Big Four reports favor procedural rigor. Specialized firms favor analytical depth and tailored adjustments. The structural framework is consistent. The institutional read is what differs.
Big Four reports favor procedural rigor and standardized format, with deep tie-out documentation and a consistent house structure across engagements.
Mid-tier firms balance procedural discipline with sector familiarity, producing reports that institutional lenders and acquirers underwrite against routinely.
Specialized transaction advisory firms favor analytical depth and tailored adjustments, building the read around the specific earnings architecture of the business.
The TEOL QofE Pre-Read is the precursor to the full report. It is a 30 to 45 day institutional examination of EBITDA quality across the eight adjustment categories, executed before the seller commits to a transaction process. Where the full report defends a position to a counterparty, the Pre-Read surfaces and resolves the issues while the seller still controls timing, so the report that follows starts from a defended base rather than a vulnerable one. Operators who deploy a Pre-Read defend 8 to 18 percent more EBITDA than operators who do not.
The sequence is built, not improvised. The Pre-Read identifies the exposures, the EBITDA Quality Calculator scores them, and diligence defense and response assembles the evidence each report section depends on. Read against the sell-side QofE Pre-Read, the work is the difference between commissioning a report that defends and receiving one that exposes. Begin in the Operating Library, then build the examination before the buyer builds it for you.
The nine sections, the eight adjustment schedules, and the findings memorandum are strongest when the examination precedes the buyer. Run the QofE Pre-Read first, or open the diligence defense engagement.