Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
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.
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.
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.
4.
Which of these companies best exemplifies the use of the network effect?
EBay. eBay is the quintessential example of a company with a strong network effect.
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.
