A financial aggregate is a composite indicator constructed by aggregating or restating raw accounting data to reflect a company's underlying economic performance. The most commonly used aggregates in business valuation and due diligence are EBITDA, EBIT, normalised net income and free cash flow. Their normalisation — removing non-recurring, exceptional or non-cash items — is the foundation of multiple-based valuation and DCF analysis. The quality of earnings review aims precisely to validate the robustness of these aggregates.

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Example: a Swiss services company reports EBITDA of CHF 2.1 million. After normalising for excessive management remuneration (+CHF 350,000), below-market rent (-CHF 180,000) and one-off exceptional charges (+CHF 120,000), the normalised EBITDA amounts to CHF 2.39 million — the basis for the valuation multiple applied in the acquisition price negotiation.

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At Hectelion, defining and defending normalised aggregates is at the heart of every quality of earnings and valuation engagement.