Warren Buffett on why he prefers looking at company balance sheets over income statements: ‘Harder to play games, hide’

Key Highlights

• Explaining his rationale, Warren Buffett stated: “I spend more time looking at balance sheets than I do income statements.
• Wall Street really doesn't pay much attention to balance sheets.
• But I like to look at balance sheets over an 8 or 10-year period before I even look at the income account.
• Because there are certain things it's harder to hide or play games with on the balance sheet than you can with the income statement.” He acknowleged that neither document gives you a “total answer”, but added, “you still ought to understand what the figures are saying and what they don't say.
• What they can't say, and what the management will like them to say, what the auditors wouldn't like them to say…” “There's just a lot to be learnt and, and you do learn more from balance sheets, in my view, then most people give them credit for,” he added.