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Mastering Quality Of Earnings (QoE) Analysis: The 5-Step Guide for Bankers in Pandemics, Recessions, and Economic Uncertainty

1️⃣ Analysis of recurring revenue:

• Assess the stability and predictability of the company’s revenue.
• Identify sources of recurring revenue and the proportion they represent.
• Consider the impact of the pandemic and Covid subsidies received, as well as the possibility of a recession on these revenue sources.

2️⃣ Diversification of customers and markets:

• Examine customer concentration and dependence on certain markets.
• Assess the company’s ability to diversify and adapt to market changes.

3️⃣ Analysis of fixed and variable costs:

• Estimate the company’s flexibility in the face of demand fluctuations.
• Identify measures taken to reduce costs during a crisis (e.g., workforce reduction, process optimization).

4️⃣ Risk and cash management:

• Examine the solvency and liquidity of the company.
• Assess risks related to debts and financial commitments.
• Analyze risk management strategies during periods of uncertainty.

5️⃣ Adaptability and innovation:

• Consider the company’s ability to innovate and adapt to market changes.
• Assess investments in R&D and ongoing projects to address current challenges.

Engage a forensic accountant and a business valuation expert for:

• In-depth expertise and experience in business valuation.
• A thorough report on the fair market value of the company in this difficult and uncertain context.
• Solid support for informed decision-making in financing and investment matters.

#QualityOfEarnings #Banks

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