Image source: The Motley Fool.

The fortunes of Chipotle Mexican Grill (CMG -2.57%) have taken a turn for the worse over the past six months thanks to a series of food-borne illness outbreaks at a number of its locations. But while analysts and commentators have tended to focus on the impact on the burrito maker's income statement -- its same-store sales in particular -- investors shouldn't lose sight of the damage that's been done to Chipotle's balance sheet.

Make no mistake about it: The income statement is important. It shows a company's revenue, expenses, and earnings. If you're looking to see how quickly a company is growing, or how profitable it is, then this is the financial statement for you.

But if you're trying to assess how resilient and financially robust a company is, then you'll want to look instead at its balance sheet, which compares a company's assets to liabilities, allowing you to see whether it has enough resources to cover its obligations. Suffice it to say, a company with a lot of cash and highly liquid investments relative to debt is in a good position to survive economic downturns or other troubling times.

Chipotle's balance sheet was a paradigm of strength prior to the first of its food-borne illness outbreaks last year. At the end of the third quarter of 2015, it had $604 million worth of cash and equivalents, as well as $625 million worth of long-term investments. Meanwhile, it had absolutely no debt and $2.4 billion in shareholder equity.

To put this into context, the typical company on the S&P 500 has a debt to equity ratio of 0.77. This implies that an ordinary company in Chipotle's position would have more than $1.9 billion worth of debt (77% of $2.4 billion).

The good news for Chipotle shareholders is that its balance sheet is still strong. Most importantly, despite repurchasing $1 billion worth of stock over the last three quarters and seeing its earnings devolve into losses, the company is still debt free. Investors can thereby rest assured knowing that Chipotle has the financial fortitude to weather losses for an extended period of time, if it needs to do so.

The bad news, though, is that its balance sheet is deteriorating. Chipotle's cash and equivalents has dropped 69% since topping out in the third quarter of last year. Today, the figure sits at just $190 million. The same thing has happened with Chipotle's cache of long-term investments, which has fallen 40% over the same stretch. It's now at $376 million.

Data source: Chipotle Mexican Grill. Chart by author.

Still, even though Chipotle isn't in imminent danger of insolvency -- it's not even close -- the decline in its liquid wealth has nevertheless begun to take a toll. Consider the trend in the chain's stock buybacks, which it's been pursuing since its share price fell from more than $700 last year to around $400 today.

In the first two quarters after its initial food-borne illness outbreak, Chipotle was aggressive with repurchases, buying back $314 million worth of stock in the fourth quarter of 2015 and $584 million more in the first quarter of this year. But this fell to only $100 million in the three months ended June 30. I don't know for sure if Chipotle scaled back its repurchases because of the decline in its cash and investments, but that seems like a reasonable conclusion.

Ultimately, the lesson here isn't that Chipotle is in trouble. Its fortunes have changed for the time being, but things will improve, and five years down the road, we'll probably forget all about its recent spate of trouble. Rather, the lesson is that all companies run into serious problems from time to time, but it's only those with balance sheets as strong as Chipotle's that allow their shareholders to sleep easy until the storm passes.