Answers / Financial Due Diligence
Give me 3 examples of QoE adjustments.
A core Financial Due Diligence interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
(1) Owner compensation normalization: Owner pays himself €80k; market CEO salary is €200k. Adjust EBITDA down by €120k. (2) Non-recurring legal costs: One-off patent dispute settlement of €300k. Add back to EBITDA. (3) Below-market related-party rent: Rent paid to owner's company at €5k/month vs. market €9k/month. Adjust EBITDA down by €48k annually.
WHAT INTERVIEWERS LISTEN FOR
- ✓Owner compensation normalization
- ✓Non-recurring legal costs
- ✓Below-market related-party rent
COMMON MISTAKES
- ✗Adjusting EBITDA up for owner compensation
- ✗Treating non-recurring items as recurring
- ✗Ignoring related-party transaction adjustments
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