What are Level 2 inputs for Crab N Spice's financial instruments?

According to the 2024 FDD, Level 2 inputs for Crab N Spice's financial instruments are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs can 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 those that can be derived from market data but are not direct, real-time prices for the exact same item. Instead, they might be based on the prices of comparable items or prices in less liquid markets. This is a step down from Level 1, which relies on actively traded prices for identical items.

For a prospective Crab N Spice franchisee, understanding these classifications is important for assessing the financial statements. It helps to understand how the company values its assets and liabilities, and the degree to which these valuations rely on observable market data versus internal assumptions. While the FDD provides this definition, it does not specify which particular assets or liabilities Crab N Spice values using Level 2 inputs, so further inquiry may be needed to fully understand the implications.