Youre anxious to start investing in the stock market, so you decide to buy stocks in companies that you are personally interested in. You need to choose between your favourite shoe company, SweetFeet, and your favourite sports drink company, SportsAde. Upon looking at the balance sheet for each company, you see that SportsAdes assets total $3.5 million and liabilities equal $500,000. SweetFeets assets are only $2 million and liabilities equal $1.8 million. However, you know from your business classes that you should also look at the income statements for each company. Upon looking at the income statements, you find that SportsAdes revenues are less than expenses, and the company has a loss of $2 million. SweetFeets revenues are $2.9 million and expenses are only $1.2 million, giving a profit of $1.7 million.

Which of the following is true?

a. Based on the income statements, SportsAde is in a better financial position and you should purchase its stock.

b. It is necessary to compare both the income statement and the balance sheet to get an accurate picture of the financial health of each company.

c. Comparing both the income statements and the balance sheets shows that SportsAde is the better choice to invest money in.

d. Based on the balance sheets, SweetFeet is in a better financial position and you should purchase its stock.