Choose wisely. There is only one correct answer to each question.
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1.
Warren Buffett has written that he _______ when he misses out on big returns in areas he doesn't understand.
Isn't bothered. Rather, he sticks to what he knows, despite new trends.
2.
If a company does not have sustainable competitive advantages over others, then it is easier to estimate the value of its future cash flows.
False. It is harder, not easier, due to the unpredictability of its business.
3.
To Warren Buffett, anytime a stock is selling for less than its fair value, it therefore has an acceptable margin of safety.
False. Not just any discount is acceptable. It must be substantial and satisfactory to him.
4.
All of the following statements about Warren Buffett are false except _______.
Buffett believes that he has never made a good deal with bad people. Though the economics of a business is the most important factor, Buffett believes it's important to work with competent, honest managers. He believes that he has never made a good deal with a bad person.
5.
What does Warren Buffett think that diversification will do to your portfolio?
Lower returns and increase risk. Buffett does not accept the common view of diversification. Rather, he sees it being detrimental in a lot of cases.
6.
How does Warren Buffett determine a company's value?
He estimates the company's future cash flows and discounts them at an appropriate rate. His method is actually common among investment professionals, and is very accurate.
7.
All of the following statements about Warren Buffett are false except _______.
Buffett believes that stock market prices are sometimes much too high or too low. Buffett focuses on the intrinsic value of businesses, not stock prices and the behavior of "Mr. Market."
