Glossary · Reading the business
Cost or Market Value
In short
An accounting principle requiring inventory to be valued at the lower of its original cost or its current market value. This prevents overstating asset values if market prices drop.
What it means in a deal
When assessing a business's Balance Sheet, pay attention to how inventory is valued. If market conditions have changed, the stated inventory value might be higher than what you could actually sell it for. This impacts the true value of the assets you're acquiring and can affect collateral analysis.
Related terms
Common questions about Cost or Market Value
- How does a lender determine the fair market value of business equipment used as collateral?
- How does the SBA verify the fair market value of assets contributed as equity injection?
- How does a lender evaluate the market value of collateral when there are limited comparable sales?
- If a borrower contributes equipment as equity, how does the lender verify its fair market value?
- How does the SBA evaluate the fair market value of goodwill in a business acquisition for financing?
- Can the fair market value of raw materials I contribute to the acquired business count towards equity?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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