Earnings may be recast
Revenue timing, normalization adjustments, owner expenses, reserves, accruals, and nonrecurring items can change the earnings base used in valuation.
Patterns can alter risk
Customer concentration, margin volatility, cash conversion, and dependence on recent growth may influence a buyer’s confidence in projections.
Preparation improves response
When management understands the analysis in advance, it can correct errors, support adjustments, and explain performance without appearing reactive.
Questions for Owners
Questions worth considering
- Which adjustments are recurring in practice?
- Do earnings convert to cash?
- Can management support projections with operating evidence?