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Erudite AfricaCenter of Excellence
← Due Diligence Mastery

Financial due diligence and quality of earnings

Module 02 / 5 · 70 min

Turn reported profit into sustainable earnings, prove it to cash, and find the net debt, debt-like items and loan book losses that the balance sheet does not show.

In this module you will learn to

  • Prepare a quality of earnings bridge from reported to normalised profit
  • Test revenue recognition and prove reported sales to cash and VAT returns
  • Separate inflation and exchange rate effects from real performance
  • Identify net debt, debt-like items, working capital and off-balance-sheet exposures
  • Re-grade a lender's loan book and quantify the provision shortfall

Built on

  • Erudite Africa training module: Ethiopian Context, topic 3.d Due Diligence Mastery, Levels 1 and 2 (October 2026)
  • NBE directives as listed in the lessons: SBB/90/2024, SBB/92/2024, MFI/36/2023, Instruction FCPED/142/26
  • Ethiopian tax laws: Income Tax Proclamation No. 979/2016 as amended by No. 1395/2025, VAT Proclamation No. 1341/2024, Federal Tax Administration Proclamation No. 983/2016, Transfer Pricing Directive No. 981/2024
  • ESX Rulebook (December 2024)
  • A commercial bank's Revised Credit Procedure Manual (August 2025), unnamed
  • IFC Performance Standards on Environmental and Social Sustainability

Examples and companies are fictional. Bank practices are shown as typical Ethiopian practice, not as any one bank's policy. Always apply your own institution's approved policy and the current NBE directives.