Choose wisely. There is only one correct answer to each question.
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1.
Of the following four questions about business analysis, which one would you most likely need outside help answering?
How well is the business positioned relative to its competitors? For this one, you would need to get information about several other businesses to help you answer it.
2.
In the terminology of economic moats, a concept developed by Warren Buffett, a moat can be described by which of the following terms?
Both of the above. A moat has width and depth, and these characteristics help describe its value to the business.
3.
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.
4.
High switching costs help companies _______.
Raise prices without the risk of losing customers.
5.
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.
