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This test consists of 5 short answer questions, 10 short essay questions, and 1 (of 3) essay topics.

Short Answer Questions

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

2. Major business activities grouped together aided _____ by providing data in a more useful form.

3. Options were often ______ at exercise which made them more expensive than publicly traded options.

4. Berkshire is too well developed and managed to add intrinsic business value with new ___________ paid for with common stock.

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. Why would a company want to repurchase their own shares, according to Buffett?

2. What was the purpose of Buffett and Munger focusing on buying up 100% of a company and the investment must use a lot of capital?

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

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

5. What was the result of information that is necessary to report to an investor or shareholder?

6. 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?

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

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

9. What happened as the result of the fictional accounting actions by US Steel?

10. Despite his frustration with the GAAP, what did Buffett come to realize about accounting data?

Essay Topics

Write an essay for ONE of the following topics:

Essay Topic 1

Buffett didn't like to invest in banking because of the leverage involved. Banks were too difficult as investments most of the time.

Part 1: Do you think that banks can be good investment choices?

Part 2: Why do you think it might be better to stay away from banks as investments?

Part 3: How do you think a bank might become a better investment for a larger company?

Essay Topic 2

The textile company grew from a simple company to one that was a multi-million dollar corporation over time.

Part 1: Do you think it's the dream of all companies to become multi-million dollar companies?

Part 2: Why do you think Buffett and Munger aspired to do more with the company they had?

Part 3: Would you rather stay as one company or try to grow bigger over time?

Essay Topic 3

Buffett and Munger supported acquiring firms only when the added intrinsic value to their market shares.

Part 1: Why do you think Buffett and Munger only wanted to acquire firms that added value?

Part 2: Do you think modern day companies limit the types of companies they acquire?

Part 3: How do you think Berkshire Hathaway might be been different had they simply bought any company that was up for sale?

(see the answer keys)

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