For all those who bet big on Enron shares and were done wrong, here’s a quiz:

1. Compare and contrast a corporate balance sheet, income statement, cash-flow statement and reconciliation of net worth statement.

Recently, the unending Enron soap opera featured a string of Wall Street analysts telling skeptical lawmakers that, “Gee, Enron sure snookered us.” If so, you wonder how the ordinary investor could have known that Enron’s soaring profits were fake and that the stock was sure to tumble when everyone found out. Today, the bankrupt energy trader’s shares are going for about 27 cents, down from $90 18 months ago.

None of us Ordinary Joes could have known, of course. But there were some red flags that should have scared off most amateur investors.

Most important, the company’s financial statements were practically impossible to understand. Just reading these enormous documents would be a full-time job. But assuming you did, you would have found that Enron operated through an extensive network of partnerships and subsidiaries for which it gave little detail.

We now know that these “special purpose entities” were used to hide crushing debts. But it’s long been clear that to invest in Enron was to buy a pig in a poke.

2. What’s the difference between an operating expense and a depreciation expense?

A smart investor considering a stock would assemble a collection of news stories on the company, a task that’s pretty easy on the Internet. Again, one would have found a consistent theme: For years, Enron had been decried as an “opaque” company that disclosed too little.

3. How does a company calculate gross income, operating income and net income?

Enron, of course, was a high-flier. From 1990 through 2000, shares soared about 1,000 percent.

But investors’ intoxication with the stock was a warning sign in itself. That’s how bubbles grow  and bubbles always burst. Even if Enron had been a solid company, a smart investor should have realized that the enthusiasm could become irrational.

When the shares peaked at $90 in August 2000, the ratio between the share price and the previous 12 months’ earnings was a staggering 64-1. Even if the earnings figures had been true, earnings would have had to quadruple to get that P/E ratio back to a more reasonable level of 15-1. If earnings stayed flat, the only other way to return to earth was for the price to drop by three-quarters.

Investing in bubbles can be profitable, of course, but only if you have a plan for getting out before everyone else does. Most small investors who ride a skyrocket stay on it until it explodes. That lesson should have been clear after the Nasdaq cratered  a year before Enron did.

4. What’s the purpose of each type of cash-flow figure: from operations, from investing, from financing? Which of these can be calculated by direct and indirect methods, and what’s the purpose of each method?

Wasn’t there plenty of research predicting good times for Enron  the stuff from all those Wall Street analysts?

Sure, but even if you thought the research was right, there was a red flag in the fact that everyone knew about it. Rosy predictions on a well-known company quickly become part of the common wisdom, and the stock price rises to reflect this knowledge.

People who get rich on individual stocks do it by investing before the fad begins. To do that, you must have an insight that others don’t. It’s not likely that many Enron shareholders could have understood its exotic energy-derivatives business even if the company had described them.

5. How is each of the following calculated, and what is its significance: the liquidity ratio, the current ratio, the quick ratio?

There’s nothing wrong with investing in individual stocks, so long as one doesn’t bet the retirement and college-education funds on a throw of the dice. But how many people have time to do sufficient research even if they know how? Keep in mind that a portfolio composed of individual stocks has to have a whole bunch of them, else there are too many eggs in one basket.

If you read all the way to here looking for answers to the quiz, you’ll find I’ve picked up a trick from Enron: I’m not telling.

After all, what’s the point? It could take years for a beginner to master all this stuff.

So, unless you know you got all the answers right, don’t fool with individual stocks. Mutual funds are the way to go.