The Warren Buffett Way Workbook

Chapter 4

Common Stock Purchases

NINE CASE STUDIES

Answers to Multiple-Choice Questions

1. B. Buffett’s belief is that an investment should be held if it is better than having funds in cash.

2. B. The decision to take the Washington Post Company public was primarily done in order to relieve the company of the burden of determining a market value for its shares, along with the goal of enabling family heirs to plan their estates more profitably.

3. D. Buffett would be content to hold any security indefinitely, so long as the prospective return on equity capital of the underlying business is satisfactory, management is competent and honest, and the market does not overvalue the business.

4. B. Although Berkshire Hathaway was acquiring class B shares, Katharine Graham was concerned about a non–family member taking such a large stake in the paper. Warren Buffett calmed those fears by naming Katharine Graham’s son Don the proxy to vote Berkshire’s shares.

5. C. After becoming comfortable with Berkshire Hathaway’s investment in the Washington Post Company, Katharine Graham named Warren Buffett to the board of directors, and he took on the role as chairman of the finance committee.

6. A. Warren Buffett was always respectful of high-quality journalism, but he always thought of newspapers primarily as businesses. He believed profits and not influence to be the rewards for the owners of a newspaper.

7. C. Warren Buffett said that even a third-rate newspaper can generate adequate profits if ...