Quality of earnings (QoE)

Quality of earnings — the discipline (a formal QoE report, in larger deals) of interrogating each revenue peso’s certainty rather than its size: recurring vs project, retained vs contingent (the recruiting teardown’s split), documented vs cash-drawer, transferable vs owner-personal. The PH-specific QoE trap: a business whose real revenue exceeds its books is not an upside surprise — declaring those earnings would trigger the taxes that erase them, so you value on declarable earnings and let the seller keep his informality discount.

First used in: 4.3 · PH due diligence: acquisition II