{"ok":true,"canonical_url":"https://dealroom.so/glossary/quality-of-earnings","api_url":"https://dealroom.so/api/public/glossary/quality-of-earnings","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"quality-of-earnings","term":"Quality of Earnings","group":"Reading the business","definition":"An analysis that scrutinizes a business's financial statements to identify the true, sustainable earnings and remove non-recurring or discretionary items. This helps understand the business's actual profitability.","what_it_means":"A QOE report adjusts reported earnings (like EBITDA or SDE) for unusual, non-recurring, or owner-discretionary expenses. This helps buyers and lenders see the normalized, ongoing profitability of the business. Insist on a thorough QOE review during due diligence to validate the seller's financials and proposed add-backs.","url":"https://dealroom.so/glossary/quality-of-earnings","official_sources":[],"related":[{"slug":"add-backs","term":"Add-backs","url":"https://dealroom.so/glossary/add-backs"},{"slug":"ebitda","term":"EBITDA","url":"https://dealroom.so/glossary/ebitda"},{"slug":"sde","term":"SDE","url":"https://dealroom.so/glossary/sde"},{"slug":"due-diligence","term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"}],"related_questions":[{"question":"Can a business's retained earnings count as equity injection?","url":"https://dealroom.so/sba-loans/basics/can-a-business-s-retained-earnings-count-as-equity-injection"},{"question":"Can I use my business's retained earnings from a prior venture as equity injection?","url":"https://dealroom.so/sba-7a/questions/can-i-use-my-business-s-retained-earnings-from-a-prior-venture-as-equity-injection"},{"question":"Can I use a secured personal line of credit as part of my equity injection?","url":"https://dealroom.so/sba-7a/questions/can-i-use-a-secured-personal-line-of-credit-as-part-of-my-equity-injection"},{"question":"Can a seller-financed portion of the sale be considered part of my equity injection?","url":"https://dealroom.so/sba-loans/basics/can-a-seller-financed-portion-of-the-sale-be-considered-part-of-my-equity-injection"},{"question":"Can a buyer's assumption of existing business debt count as part of the equity injection?","url":"https://dealroom.so/sba-7a/questions/can-a-buyer-s-assumption-of-existing-business-debt-count-as-part-of-the-equity-injection"},{"question":"Can I use funds from a personal line of credit as part of my equity injection?","url":"https://dealroom.so/sba-7a/questions/can-i-use-funds-from-a-personal-line-of-credit-as-part-of-my-equity-injection"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Quality of Earnings","url":"https://dealroom.so/glossary/quality-of-earnings","source_type":"DealRoom Data"}}