If you could look at only one financial statement to judge a company, which would you choose and why?

I'd choose the cash flow statement. What I most want to know is whether a company turns its activity into cash, and that's the statement built to show it. The first reason is that it's the hardest one to flatter. The income statement runs on accrual accounting, so it includes revenue that hasn't been collected and non-cash charges like depreciation, and those rest on management's estimates. Cash either came in or it didn't. The second reason is how much of the other two statements comes with it. The top line is net income, so I already have the bottom of the income statement. The working capital lines tell me how receivables, inventory and payables moved. Investing gives me capital expenditures, and financing gives me debt raised or repaid, buybacks and dividends. What I'd give up is revenue and margins.

I'd choose the cash flow statement. What I most want to know is whether a company turns its activity into cash, and that's the statement built to show it. The first reason is that it's the hardest one to flatter. The income statement runs on accrual accounting, so it includes revenue that hasn't been collected and non-cash charges like depreciation, and those rest on management's estimates. Cash either came in or it didn't. The second reason is how much of the other two statements comes with it. The top line is net income, so I already have the bottom of the income statement. The working capital lines tell me how receivables, inventory and payables moved. Investing gives me capital expenditures, and financing gives me debt raised or repaid, buybacks and dividends. So I'd read three things. First, cash flow from operations against net income. If profit keeps running ahead of cash, I'd look to receivables and inventory for the reason. Second, capital expenditures against depreciation, which tells me whether the company is investing to grow or only maintaining what it has. Third, the financing section, to see whether the business pays its own way or depends on new debt and new shares. What I'd give up is the level of things. I'd see debt raised this year but not total debt, and I wouldn't see revenue and margins, so growth and profitability would be hard to judge. One year can also mislead, because capital spending is lumpy and a young company can burn cash for good reasons, so I'd want a few years of it. And if you offered me the income statement plus the opening and closing balance sheets instead, I'd take those, because I can build the cash flow statement from them.