Quality of earnings analysis

Tie the management accounts to the trial balance and audit, then bridge reported to diligence adjusted EBITDA. Every adjustment traced to the ledger and its support

Customize this Agent

XLSXDOCX16 steps

The problem

Every add back is paid for many times over at the bid multiple

Management adds back the higher reserve for obsolete stock as non cash and a quality escape's scrap as one time. Cost variances sit on the balance sheet until December, so LTM August carries all of 2025's and none of 2026's. Fixed overhead parked in an inventory build flatters the margin

The request

Project Anvil: buy side QoE on a precision machined components manufacturer, December year end, standard costing. Everything is attached. Tie the management accounts to the trial balance and audit, run the LTM proof of cash, and build reported EBITDA for FY24, FY25 and LTM August 2026. Accept, revise or reject every management adjustment against its support, with reasons, including the full year of the January price increase. Add our run rate, pro forma and out of period adjustments, including variances and overhead held in inventory and the January standard cost roll. Databook and short report with customer concentration and margin, maintenance and growth capex, monthly NWC and a peg on the LOI definition, debt like items and the EBITDA bridge.

Anvil monthly management accounts Jan24 to Aug26.xlsx
Anvil monthly trial balances Jan24 to Aug26.xlsx
Anvil GL detail Jan24 to Aug26.csv
Anvil FY24 audited financial statements.pdf
Anvil FY25 audited financial statements.pdf
Anvil inventory listings by part Dec24 Dec25 Aug26.xlsx
Anvil invoice register by part Jan24 to Aug26.csv
Anvil AR and AP agings Jan24 to Aug26.xlsx
Anvil payroll registers Jan24 to Aug26.xlsx
Anvil bank statements Sep25 to Aug26.pdf
Anvil management adjusted EBITDA.xlsx
Anvil adjustments support binder.pdf
Project Anvil LOI.pdf

How Axe works

ApprovedChanges asked

Your reviewApprove, or say what to change

Approved or changes

Databook and reportDatabook, report and tie out

Final reviewApprove the revised files

Revised databook and reportRevised files and tie out

Step

Test management adjustments

Prompt

Sent to the model at this step

Take each adjustment in management's schedule in turn: what it is, the amount by period and management's rationale. Trace it to the general ledger entries behind it and to the invoice, payroll record, contract or agreement in the support binder. Test that the cost sits in the period claimed, is not already below EBITDA and does not recur: search the ledger for the same vendor and account in every other period. Look for income left in that belongs with a cost taken out. An increase in the excess and obsolete reserve is an operating cost even though no cash moved when it was booked; accept it only for a product line the business has exited. For the quality escape, accept only scrap, rework and customer credits above the normal scrap rate, with the customer's claim behind them. Allow the January 2026 price increase only for customers the invoice register shows billed at the new price, only for the LTM months billed at the old one, and net of any material cost it passes through. Normalize owner compensation, from the payroll registers, only to a market cost for the role that remains after close, including payroll taxes and benefits. Conclude accepted, revised or rejected, and recalculate every revised amount. Keep rejected adjustments in the register with the reason. An adjustment without support is marked open, shown at management's amount and kept out of diligence adjusted EBITDA until the support arrives.

Uses

Deal brief
Management accounts
Trial balances
General ledger
Audited financial statements
Inventory listings
Invoice register
Receivables and payables agings
Payroll registers
Bank statements
Management adjustments
Adjustment support
Letter of intent
Reconciliations
Monthly income statement

Produces

Tested management adjustments

What you get back

XLSXQoE databookFormula linked reconciliations, proof of cash, adjustments register, EBITDA bridge, capex, NWC and peg

DOCXQoE reportThe bridge first, then each adjustment's conclusion, inventory, customers, the peg and open items

Tie out reportEach figure marked tied, recalculated or open, every correction logged

Make it yours

Change the periods, the peg method, the working capital definition or the report layout your firm uses. Every step and every prompt can be edited

Customize this Agent

Opens a private copy of this Agent in your workspace, ready to adapt to your own sources

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