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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. Pooling overcame the deficiency of ____________ amortization in a merger, which was really a purchase.

2. Buffett followed the simple rule that the same amount of intrinsic business value must be exchanged with each ________ transaction.

3. The Berkshire dividend share of Coca-Cola in 1990 included operating earnings of ___________.

4. Many ended up taking Buffett and Munger ________ on faith because of the way that they reported.

5. What is NOT one of the features that Buffett and Munger looked for in acquisition opportunities?

Short Essay Questions

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

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

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

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

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

7. What was the expected benefit for the Berkshire NYSE listing, according to the book?

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

9. What did Buffett admit that he used to do when seeking out new investments thirty-five years ago?

10. What did Buffett try to do in order to avoid problems with the two contagious diseases in the investment community?

Essay Topics

Write an essay for ONE of the following topics:

Essay Topic 1

Buffett and Munger stated at several points that buying things at a fair price is a reasonable action to take.

Part 1: Do you think there is such a thing as a fair price?

Part 2: Who should be in charge of determining what a fair price might be?

Part 3: How do you determine what a fair price for an item or a service might be?

Essay Topic 2

In order to buy bonds and stock in a company, Buffett and Munger required that companies have a firm management style.

Part 1: How might you define the idea of a firm management style?

Part 2: What are some modern companies today that have a good management approach?

Part 3: Do you think a company can be a success without a strong management team?

Essay Topic 3

Buffett and Munger didn't use a strategic plan of acquisition, but rather compared opportunities against passive investments.

Part 1: Why do you think Buffett and Munger didn't have a plan for acquisitions?

Part 2: Do you think it's a better idea to have a plan when dealing with more extensive acquisition deals?

Part 3: How do you think Buffett and Munger's approach benefits them?

(see the answer keys)

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