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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. _______ transactions only allowed stock be paid compared to a purchase in which cash or stock and cash or other valuable consideration may be paid.

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

3. Many executives argued that the costs of _________ should be ignored because they were hard to value or may harm smaller firms.

4. The question of an exchange of stock arose in 1983 during the merger of Berkshire and ____________.

5. What was NOT one of the three tax-free gifting tactics that Buffett suggested to shareholders?

Short Essay Questions

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

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

4. How did Buffett avoid diluting share value to existing shareholders?

5. What did Buffett want to do with the Berkshire stock on the NYSE?

6. What was the piece of advice from a golf pro that Buffett takes to heart in his acquisition strategy?

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

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

9. What was the benefit of major business activities being grouped together?

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

Essay Topics

Write an essay for ONE of the following topics:

Essay Topic 1

Buffett pointed out that just because the market was often efficient does not mean that it is always efficient.

Part 1: Why do you think the idea of an efficient market is something to consider?

Part 2: How do you think an efficient market can impact the outcome of a financial transaction?

Part 3: Do you believe that the market is designed to be efficient?

Essay Topic 2

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 3

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?

(see the answer keys)

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