What inputs are considered Level 2 for Bombs Away's financial instruments?

According to Bombs Away's 2024 Franchise Disclosure Document, Level 2 inputs for financial instruments are those other than quoted prices included within Level 1. These Level 2 inputs are observable for the asset or liability, either directly or indirectly. Examples of Level 2 inputs include quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active.

In simpler terms, Level 2 inputs are based on market data but are not direct prices for the exact same item. Instead, they rely on prices of comparable items or prices in less active markets. This is a step down from Level 1, which uses readily available, direct prices from active markets.

For a potential Bombs Away franchisee, understanding these classifications is important for assessing the financial statements of the company. It provides insight into how the company values its assets and liabilities, with Level 2 indicating a reliance on observable but not directly quoted market data. This can affect how financial performance is evaluated and compared to other companies.

The FDD also mentions Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities and Level 3 inputs are unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.