Daddy M & M

Warren Buffett's emphasis on balance sheets over income statements is a cornerstone of his value investing philosophy. Here's a breakdown of why, with examples: Why Balance Sheets Are Less "Gameable" The core of Buffett's argument is that the balance sheet, which presents a company's assets, liabilities, and equity at a specific point in time , is harder to manipulate than the income statement, which reports a company's revenues, expenses, gains, and losses over a period of time . Income Statement (Accrual Accounting): The income statement, while crucial, is more susceptible to accounting tricks due to the nature of accrual accounting. Revenue recognition, expense matching, and estimates for things like bad debt or warranties offer more leeway for management to "smooth" earnings or make them look better than they are in reality. This is because these items often involve judgment and estimates rather than concrete cash transactions. Balance Sheet...