Discussion Forum

I see that an outside investor should look at both income statement and balance sheet in order to

make a decision whether to invest or not in a company. Most of investors look at assets of the

company and details on balance sheet to know whether the company will grow and where he or

her money will be invested in. So income statements displays profits and losses in different

periods of time.

Since we have been encouraged to choose one statement which can tell an investor to invest or

not to invest. I see that the income statement attracts attention of investors because it tells right

away the net income of a company. For example, when a company is making profit the investor

will be attracted by the net outcome without considering more factors. This is rare to find a

company that are making profits but have a bad balance sheet. But for the investor before

making a decision he or she has to understand the financial situation of the company because

none of these statements is more important than the other or less important. Both statements need

to be put in consideration before making a decision to invest in an organization.

In conclusion I would say that the two statements supplement each other in showing an investor

to tell whether to invest or not. But the income statement can outstand the balance sheet because

it tells whether the company is generating profits or no in simple terms while a balance sheet

shows the summary of how the company is performing. These two are dependent in decision

making that is why choosing one contradicts everything you say.

Reference
Franklin, M. Graybeal, P. & Cooper, D. (2020). Principles of accounting, volume 1: Financial

accounting. Open Stax Rice University. https://openstax.org/details/books/principles-financial-

accounting