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7. Preferred stock is a liability because they reflect a claim held by someone other than a common stockholder. True / False 8. If a
7. Preferred stock is a liability because they reflect a claim held by someone other than a common stockholder. True / False 8. If a company acquires another company but pays more than the book value of the sum of net tangible and intangible assets, then the difference is called goodwill. True/False 9. Depreciation and amortization reflect the estimated costs of the assets that wear out in producing goods and services. True / False 10. Cost of goods sold includes depreciation of assets such as factory building, manufacturing equipment, and any asset directly engaged in the manufacturing process, although financial analysts report deprecation separately because it's helpful in estimating cash flows. True / False 11. Because neither depreciation nor amortization is paid in cash, some analysts claim that EBITDA is a better measure of financial strength than is net income. True / False 12. Changes in stockholders' equity during the accounting period are reported in the statement of cash flows. True / False 13. Retained earnings is basically a pile of money just waiting to be used; it does not represent assets but is instead a claim against assets. True / False 14. A firm's investment in current assets -cash, marketable securities, inventory and accounts receivable -is called working capital. True / False
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