The Warren Buffett Way Workbook

Robert G. Hagstrom, Russell Rhoads

• Publisher: Wiley
• Year: 2013
• Print ISBN: 9781118574713
• eBook ISBN: 9781118794166
• Edition: 1
• Topic: Business
• Subtopic: Investments & Securities
• Index: Business

The Warren Buffett Way Workbook consists of over 500 questions and answers to help readers of The Warren Buffett Way reinforce and cement their knowledge of Buffett's hugely successful investment approach.The Workbook follows The Warren Buffett Way, 3e, providing a combination of multiple choice and essay questions for each chapter in the core book.Given the depth and range of questions, a reader who masters the material in the Workbook will be equipped with the knowledge to begin to apply Buffett's methods to his/her own investment portfolio.All answers are provided in the Workbook, including answers to the essay questions.The perfect accompaniment to The Warren Buffett Way, 3e and The Warren Buffett Way Video Course, the Workbook will provide readers with a sure path to begin investing just like Warren Buffett.

PART I

QUESTIONS

Chapter 1

A Five-Sigma Event

THE WORLD’S GREATEST INVESTOR

Multiple-Choice Questions

1. Which of the following factors contribute(s) to the growth of Berkshire Hathaway?

I. Earnings generated by wholly owned businesses

II. Fees earned from investment consulting business

III. Price appreciation of stock portfolio

A. I only

B. I and II

C. I and III

D. I, II, and III

2. Which of the following questions would an investor or purchaser of a business need to ask before investing in a company?

I. How much capital reinvestment is required to keep a company running?

II. What is the debt obligation of the company?

III. What is the track record of management?

IV. What sort of vision does management have for the future?

A. I and II only

B. II and III only

C. I, II, and IV only

D. I, II, III, and IV

3. Which of the following statements correspond(s) with Warren Buffett’s investment philosophy?

I. There should be no difference between the approach a business owner takes and the approach a purchaser of shares takes when considering an investment.

II. Special consideration should be given to a company’s competitors before investing in or buying the company.

III. When considering purchasing common stock in a company, an opinion regarding the overall stock market should come into play.

A. I only

B. I and II

C. II and III

D. I, II, and III

4. Which of the following is/are a characteristic of an investor in a company’s stock that differentiates the investor from an owner of a business?

I. Investors consider whether the stock market is in a bullish or a bearish phase.

II. An investor seeks to make money through investment in a company.

III. Investors are familiar with the financials of the company whose stock they are considering purchasing.

A. I only

B. II only

C. I and II

D. I and III

5. Which of the following terms does not apply to Warren Buffett’s approach to purchasing common shares of a public company?

A. Businesslike

B. Speculative

C. Analytical

D. Competitive analysis

6. What statement sums up the reason Warren Buffett chose to transfer from the University of Pennsylvania to the University of Nebraska?

A. He had a desire to work while taking classes.

B. He felt he should attend a university near where he would eventually settle in life.

C. The curriculum at the University of Pennsylvania was too theoretical for his taste.

D. He wanted to graduate from college quickly so he could begin his career.

7. What core concept was put forth by Graham and Dodd’s Security Analysis that appealed to Warren Buffett?

A. Relative value

B. Cash flow generation

C. Competitive advantage

D. Intrinsic value

8. In the first investment partnership established by Warren Buffett, common stocks were purchased based on intrinsic value. What other strategy was implemented in this fund?

A. Listed option overwriting

B. Cash-secured put writing

C. High-yield bonds

D. Merger arbitrage

9. Which stock did Warren Buffett end up purchasing as a result of the salad oil scandal?

A. Allied Crude Vegetable Oil Company

B. Kraft Foods

C. American Express

D. Bank Leumi

10. What was the primary business of Berkshire Hathaway before the company was purchased by Warren Buffett?

A. Auto dealerships

B. Textile manufacturing

C. Life insurance

D. Stock brokerage firm

11. Which of the following statements define the stock market in 1969 and contributed to Warren Buffett choosing to shut down his original investment partnership?

I. The stock market appeared to be very speculative.

II. He was satisfied with the returns he had achieved.

III. Investments that met the value criteria had become scarce.

A. I and II

B. I and III

C. II and III

D. I, II, and III

12. How could the success of the Bill Ruane’s Sequoia Fund trace its roots to Warren Buffett?

I. Upon closing his partnership, Buffett referred clients to Bill Ruane.

II. Bill Ruane and Warren Buffett were both students of Ben Graham.

III. Bill Ruane had been Warren Buffett’s partner in the original fund.

A. I only

B. II only

C. I and II

D. I and III

13. What was the lesson Warren Buffett learned from his experience with the Berkshire Hathaway textile company?

A. Corporate turnarounds seldom are successful.

B. Commodity-oriented businesses can be profitable if the price is right.

C. When labor and management share common goals, a business can be successful.

D. Diversification is the key to investment success.

14. What aspect(s) of the insurance business was/were very attractive to Warren Buffett?

I. The competitive advantage of owning a quality insurer

II. The ability to use an insurance company as an investment vehicle

III. The tax benefits of owning an insurance company

A. I and II

B. II and III

C. I and III

D. II only

15. Which of the following may be considered a competitive advantage for an insurance ...

Table of contents

• Cover
• Contents
• Title
• Copyright
• Dedication
• Preface
• PART I: QUESTIONS
• PART II: ANSWERS
• About the Authors
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