Two businesses for sale could report the same numeric value for “earnings” and yet be far from equal. Three factors of earnings are listed below that\u00a0tell more about the earnings than just the number.<\/p>\n
1. Quality of earnings<\/strong> 2. Sustainability of earnings after the acquisition<\/strong> 3. Verification of information<\/strong> Two businesses for sale could report the same numeric value for “earnings” and yet be far from equal. Three factors of earnings are listed below that\u00a0tell more about the earnings than just the number. 1. Quality of earnings Quality of earnings measures whether the earnings are padded with a lot of \u201cadd backs\u201d or one-time […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[5,10],"tags":[],"class_list":["post-561242","post","type-post","status-publish","format-standard","hentry","category-buyer-articles","category-valuation"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/posts\/561242","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/comments?post=561242"}],"version-history":[{"count":0,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/posts\/561242\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/media?parent=561242"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/categories?post=561242"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/tags?post=561242"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nQuality of earnings measures whether the earnings are padded with a lot of \u201cadd backs\u201d or one-time events, such as a sale of real estate, resulting in an earnings figure which does not accurately reflect the true earning power of the company\u2019s operations. It is not unusual for companies to have \u201csome\u201d non-recurring expenses every year, whether for a new roof on the plant, a hefty lawsuit, a write-down of inventory, etc. Beware of the business appraiser that restructures the earnings without \u201cany\u201d allowances for extraordinary items.<\/p>\n
\nThe key question a buyer often considers is whether he or she is acquiring a company at the apex of its business cycle or if the earnings will continue to grow at the previous rate.<\/p>\n
\nThe concern for the buyer is whether the information is accurate, timely, and relatively unbiased. Has the company allowed for possible product returns or allowed for uncollectable receivables? Is the seller above-board, or are there skeletons in the closet?<\/p>\n","protected":false},"excerpt":{"rendered":"