When valuing a business, the quality of earnings is an important factor to consider, which refers to the sustainability and predictability of a company’s earnings over time, and two key metrics used to evaluate it are Seller’s Discretionary Earnings (SDE) and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), which provide a more accurate picture of a small business’s profitability and allows investors to compare the operating performance of companies in the same industry, respectively; however, both metrics have their limitations, and it’s important to look at factors such as the company’s revenue growth, profit margins, and cash flow when evaluating the quality of earnings, with financial ratios being the most common and reliable method used for calculating it. For more information click the link!

https://iagmerger.com/why-quality-of-earnings-matters-in-business-valuations-a-deep-dive-into-sde-and-ebidta/