You are an investment adviser for a client with $100,000 to invest in the stock of publicly traded companies. Your clientwho has just enough accounting knowledge to be dangeroushas asked you to justify your advice based on the financial statements of the companies you recommend.

Your challenge is to:

1. Determine what specific information from each financial statement could best help you make your choice (possibilities include earnings, cash reserves, stock repurchases, level of debt, dividend payments, financial ratios, etc.).

2. What does that information tell you about the potential of the company to be a good investment?

3. Which of the three key statementsthe balance statement, the income statement, and the statement of cash flowsis most important? Why?