Probing foundations: Balance sheet basics

BEGINNER investors often think they can divine everything about a company by just looking at its income statement, calculating one or two ratios, and committing to buy when everyone else is buying.

Months or years down the road, the stock of the company suddenly begins a precipitous dive.

You hear whispers about "unpaid receivables", "inventory markdowns" ... or was there something about a looming bond principal payment?

Oh, but you never paid attention to those numbers. You mean they were important?

Oops. You watch aghast as the company's…