Warren Buffett: I spend 'more time looking at balance sheets' than income statements

Before even looking at the income statement, Buffett will look at 8-10 years of previous balance sheets because it's harder to hide things on it compared to the income statement. He does caution that neither of them tell the whole story though. He thinks about what management wants the statements to say and how that shapes them. If you're dealing with very candid, high integrity people, this risk of fudged statements is abated. Another reason to only deal with management of the highest quality.