Financial Analysis for Shareholders and Financial Statements of an Entity

Running head: FINANCIAL ANALYSIS
Financial Analysis
Name of the Student
Name of the University
Author Note

FINANCIAL ANALYSIS1
Table of Contents
Answer to Question 1...................................................................................................................2
Answer to Question 2...................................................................................................................3
References....................................................................................................................................4

FINANCIAL ANALYSIS2
Answer to Question 1
The owners of any company are its shareholders. They take part in the decision making
of the entity. However, the shareholders are extremely large in number and it is not possible for
all of them to run the daily activities of the entity together at once. Hence, there is a need for
their representatives who will run the organization on a daily basis and make important decisions
on behalf of the shareholders. As the company is an artificial person and it cannot enter into
agreements by itself, there is a necessity for a representative who would enter into agreements on
behalf of the company. The board of directors also performs this role (Yosifon, 2013). Not all the
shareholders may be competent in understanding the functioning of a corporate entity; the
directors are useful in communicating the decisions made by the entity in the annual meetings.
Every company has a vision and mission in place. These are helpful in guiding it in situations
where important decisions need to be taken. The Board of Directors play the role of a supervisor
and always ensure that the activities undertaken by the company are ethical and do not deviate
from its guiding principles (Volonté, 2015). The government regulations governing a corporate
entity are very high in number. The board of directors are usually aware of the law and ensure
that the entity complies with it. Apart from this, the directors are independent from the entity and
its performance. This means that they do not have any conflicting interests within the
organization and are always required to act by keeping the best interests of the entity in mind. If
they are faced with any adverse circumstances, they are free to make a firm choice, which they
think is best for the entity. Having a credible board of directors is beneficial to the entity as they
provide a balanced view on all the issues being faced by the company. Outsiders, financial
institutions and potential investors also view it as a favorable aspect. The cost of obtaining