Analysis Intermediate: Start Thinking Like an Analyst

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1.
Why might a restaurant company be unlikely to ever have anything more than a narrow moat?
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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.
2.
Why are economic moats advantageous?
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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.
3.
Determining the goal of a business is normally easy.
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False. Sometimes it is not easy, because a business might combine different objectives.
4.
High switching costs help companies _______.
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Raise prices without the risk of losing customers.
5.
Which of these is not a type of economic moat?
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Technological expertise. Technological expertise can form the foundation for an economic moat, but it is rare that the expertise provides a sustainable, long-term competitive advantage, because improvements in technology are often easily imitated.