Choose wisely. There is only one correct answer to each question.
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1.
Why are economic moats advantageous?
They allow a company to generate profits and keep competitors at bay. Companies that reward investors over the long haul are those that have a durable competitive advantage.
2.
Which of the following questions will not likely help you analyze a business?
None of the above. All of the above are good questions to ask in business analysis. There are hundreds more, of course. But these are a good start.
3.
Why might a restaurant company be unlikely to ever have anything more than a narrow moat?
Because consumer switching costs are so low. Many restaurants are quite profitable, and not all of them spend money on branding. Still, there is a lot of competition in the industry, and it's very easy to walk across the street to a rival restaurant, so the switching costs are very low.
4.
What is an economic moat?
A long-term competitive advantage that allows a company to earn oversized profits over time. A moat protects the business and does not let other businesses in.
5.
High switching costs help companies _______.
Raise prices without the risk of losing customers.
