Glossary

An engagement letter is a legal document that defines the engagement between the appraiser and the borrower. This letter should state the terms and conditions of the engagement, address the scope of the assignment and the terms of compensation.

The market capitalization of a company is simply its share price multiplied by the number of shares a company has outstanding. Enterprise value is calculated as the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

Equitable subordination refers to the legal action, typically in a bankruptcy case, by which a court rearranges the lien priority position of various creditors to move a lower priority lien up in the order. Lien priority governs the order in which creditors are paid or can foreclose on assets used to secure loans made to a company.

The ownership investment/interest in a company, typically expressed through stock certificates.

Well after the completion of the appraisal itself, appraisers will continue to monitor the company and collateral. Importantly, appraisers will often conduct retail appraisals on an equity bid basis, reflecting their willingness to provide an immediate cash guarantee on the value of the consumer goods they appraise. The result is the more definitive, accurate appraisal in the marketplace.

A legal right which permits a company to require its investors to pledge a certain amount of stock or any other security representing an ownership interest to the company.

The amount generated by applying the stated advance(s) rate to the eligible portion of the collateral and then subtracting the outstanding loan balance against that collateral.

A loan agreement or bond indenture provision that requires the borrower to apply excess cash flow (or some percentage of excess cash flow) to reduce the outstanding debt balance.