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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. A purchased firm might have _______ that increases in value over time by the amount of inflation and successful operating results.
(a) Money goodwill.
(b) Economic goodwill.
(c) Operating goodwill.
(d) Stock goodwill.

2. What was NOT one of the three tax-free gifting tactics that Buffett suggested to shareholders?
(a) Married couple gifting.
(b) Will gifting.
(c) Bargain sale.
(d) Partnership form.

3. Berkshire is too well developed and managed to add intrinsic business value with new ___________ paid for with common stock.
(a) Selloffs.
(b) Acquisitions.
(c) Notes.
(d) Bonds.

4. _________ was spurious, to Buffett, compared to depreciation charges for deteriorating assets.
(a) Amortization.
(b) Acquisition investment.
(c) Annual reporting.
(d) Stock market value.

5. Buffett and Munger did not operate a strategic plan for __________ but compare opportunities against passive investments.
(a) Stockholders.
(b) Buyouts.
(c) Acquisitions.
(d) Reports.

6. Berkshire management's goal was to acquire and to retain high quality __________.
(a) Workers.
(b) Management.
(c) Shareholders.
(d) marketability.

7. Buffett and Munger described the acquisition process as being akin to finding a ________.
(a) Gold mine.
(b) New toy.
(c) Spouse.
(d) Promised land.

8. Buffett and Munger were often asked to ________ under the assumption it would benefit shareholders, but they disagree.
(a) Split stock.
(b) Buy more holdings.
(c) Sell stock.
(d) Keep stock.

9. What did GAAP stand for, according to the text in the book?
(a) Generally agreed accounting principles.
(b) Generally accepted accounting principles.
(c) Generally accepted available principles.
(d) Generally argued accounting principles.

10. ________ earnings were the reporting of income of one company that owns another.
(a) Variant.
(b) Look through.
(c) Truthful.
(d) Fixed.

11. What is NOT one of the three excuses often given by an overpaying buyer, according to the book?
(a) The buyer must grow.
(b) Will be worth more in the future.
(c) Buyer's stock is undervalued.
(d) Will be worth less in the future.

12. Buffett followed the simple rule that the same amount of intrinsic business value must be exchanged with each ________ transaction.
(a) Dividend.
(b) Movement.
(c) Legal.
(d) Stock.

13. Buffett believed that _______ data was important to his and Munger's decision making.
(a) Stock.
(b) Investor.
(c) Accounting.
(d) Business.

14. Buffett and Munger promise to never ________ unless they are selling at a market price well below intrinsic business value.
(a) Liquidate assets.
(b) Repurchase shares.
(c) Lower dividends.
(d) Exchange shares.

15. Buffett and Munger continue to offer _______ for value trade in the acquisition process, as it seems fair to all parties.
(a) Truth.
(b) Value.
(c) Choice.
(d) Benefit.

Short Answer Questions

1. Some CEOs think that manipulating __________ could encourage the highest stock price available.

2. The partners were also interested in firms that had extraordinary ________ talent exhibiting skillful executive achievement.

3. A company might consider repurchasing _______ when it has available funds that are above long-term needs.

4. Buffett and Munger believed that marketability and __________ were two terms that increased the likelihood of turnover.

5. Main _______ changes allowed cash-basis accounting for the costs of a corporation.

(see the answer keys)

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