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Stocks 204: Start Thinking Like an Analyst

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1.
What is an economic moat?
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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.
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.
3.
Which of these companies best exemplifies the use of the network effect?
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EBay. eBay is the quintessential example of a company with a strong network effect.
4.
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.
5.
Of the following four questions about business analysis, which one would you most likely need outside help answering?
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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.