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This test consists of 5 multiple choice questions, 5 short answer questions, and 10 short essay questions.

Multiple Choice Questions

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

2. The partners were committed to providing and presenting a _______ business and ownership philosophy.
(a) Powerful.
(b) Consistent.
(c) Long-term.
(d) Active.

3. Berkshire shareholders can be assured that the company _______ statements are accurate.
(a) Holding.
(b) Honor.
(c) Financial.
(d) Recommended.

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

5. Many executives argued that the costs of _________ should be ignored because they were hard to value or may harm smaller firms.
(a) Charges.
(b) Reinvestment promises.
(c) Dividends.
(d) Stock options.

Short Answer Questions

1. During what year were the Berkshire shares to be traded on the New York Stock Exchange?

2. LBO operators benefitted from the use of ________ to reshuffle business, risk little of their own money to gain high fees, etc.

3. Buffett and Munger described the acquisition process as being akin to finding a ________.

4. The different classes of stock allow _______ investors to still have value for the money they can spend.

5. The satire talked about charging off ________ value to negative one million dollars so the company could convert depreciation cost to annual appreciation gain.

Short Essay Questions

1. What was the difference between the purchase and the pooling transaction?

2. What were the two categories of most interest for Munger and Buffett when they wanted to add to their holdings?

3. What were the two super contagious diseases that could spread in the investment community?

4. What was the first step in the US Steel fictional accounting process?

5. What did Buffett expect to owners of stock to do when he creates a principle that earnings should be retained to the extent each retained dollar creates at least one dollar of market value for owners?

6. What did Buffett say should happen to some earnings in dividends?

7. What was done in order to minimize any loss from accounting adjustments during the US Steel transactions?

8. What question emerged during the merger between Berkshire and Blue Chip in 1983?

9. What threatened the global competitiveness of major American industries, according to the book?

10. Why did many executives argue about the costs of stock options and why they should be ignored?

(see the answer keys)

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