Chapter 3

Buying a Business


Multiple-Choice Questions

1. Which of the following does Warren Buffett consider the most critical issue in a business he has a stake in?

A. Earnings growth

B. Capital allocation

C. Expense control

D. Personnel decisions

2. Which of the following are advantages that have been discovered by Warren Buffett in cases where he will take a minority stake in a publicly traded company?

I. There is a high level of transparency when owning a public company.

II. The market for finding companies to invest in is larger with public companies.

III. He is able to gain a seat on the board of directors of public companies.

IV. The stock market allows Buffett a place to find more potential bargains.

A. I and II

B. I and III

C. II and III

D. II and IV

3. When approaching the investing process, how does Warren Buffett view himself?

A. As a security analyst

B. As a business analyst

C. As a market analyst

D. As a macroeconomic analyst

4. Which of the following are considered Warren Buffett’s business tenets?

I. Is the business simple and understandable?

II. Does the business dominate all competitors?

III. Does the business have a consistent operating history?

IV. Does the business have favorable long-term prospects?

A. I, II, and III

B. I, II, and IV

C. I, III, and IV

D. I, II, III, and IV

5. When Warren Buffett considers purchasing a stock, he makes his decision in terms of which of the following?

A. Market theories

B. Macroeconomic cycles

C. How ...

Get The Warren Buffett Way Workbook now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.