Final answer:
Potential investors typically study the Balance Sheet to determine if a company meets their investment requirements.
Step-by-step explanation:
Potential investors typically study the Balance Sheet in a firm's annual report to determine whether the company meets their investment requirements. The balance sheet provides a snapshot of a company's financial position at a specific point in time, showing its assets, liabilities, and shareholders' equity.
By reviewing the balance sheet, investors can assess a company's liquidity, solvency, and financial stability. They can also analyze its ability to generate profits and its overall financial health.
Other financial statements, such as the income statement, statement of cash flows, and notes to the financial statements, provide additional information that investors may consider.