How can financial statement and cash flow exercises be used to evaluate businesses?

"Preparing for Tomorrow's Workplace Skills 1. Your firm has been hired to help several small businesses with their year-end financial statements. a. Based on the following account balances, prepare the Marbella Design Enterprises balance sheet as of December 31, 2018: Cash $30,250 Accounts payable 28,500 Fixtures and furnishings 85,000 Notes payable 15,000 Retained earnings 64,450 Accounts receivable 24,050 Inventory 15,600 Equipment 42,750 Accumulated depreciation on fixtures and furnishings 12,500 Common shares (50,000 shares at $1) 50,000 574 Chapter 14 Using Financial Information and Accounting This OpenStax book is available for free at http://cnx.org/content/col25734/1.7\n\nLong-term debt 25,000 Accumulated depreciation on equipment 7,800 Marketable securities 13,000 Income taxes payable 7,500 b. The following are the account balances for the revenues and expenses of the Windsor Gift Shop for the year ending December 31, 2018. Prepare the income statement for the shop. (Resources, Information) Rent $ 15,000 Salaries 23,500 Cost of goods sold 98,000 Utilities 8,000 Supplies 3,500 Sales 195,000 Advertising 3,600 Interest 3,000 Taxes 12,120 2. During the year ended December 31, 2018, Lawrence Industries sold $2 million worth of merchandise on credit. A total of $1.4 million was collected during the year. The cost of this merchandise was $1.3 million. Of this amount, $1 million has been paid, and $300,000 is not yet due. Operating expenses and income taxes totaling $500,000 were paid in cash during the year. Assume that all accounts had a zero balance at the beginning of the year (January 1, 2018). Write a brief report for the company controller that includes calculation of the firm’s (a) net profit and (b) cash flow during the year. Explain why there is a difference between net profit and cash flow. (Information, Systems)"