Principles of Finance

FIN-500: Principles of Finance

Student’s Name

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Equity Section of the Balance Sheet

The items on the equity section of the balance sheet are important to investors to provide insight into the company’s health in terms of debt to equity ratio. The items indicate the amount of equity an investor has in the company in addition to the net income after dividends have been paid, stocks bought back, and those held in treasury as well as the number of investors holding the company stock (Keown, Martin & Petty, 2017). Therefore, the performance of the company equity determines the market price of its shares of stock.

Saudi Arabia’s Vision 2030 provides opportunities for privatization of companies, which indicates that more investors would have to study the companies’ balance sheets to make informed decisions on where to invest. This indicates that the equity section would be useful in providing the necessary trends to shape the investors’ opinion on the preferred companies to invest (Keown et al., 2017).

Buallay, A., Hamdan, A., & Zureigat, Q. (2017). Corporate governance and firm performance: evidence from Saudi Arabia. Australasian Accounting, Business and Finance Journal, 11(1), 78-98. https://ro.uow.edu.au/aabfj/vol11/iss1/5/

This article examines the level of corporate governance practices among quoted companies in Saudi stock exchange. The authors investigate the effect of corporate governance on the companies’ performance using data from 2012 to 2014 by measuring governance on operational, financial, and market performance (Buallay, Hamdan & Zureigat, 2017). The article combines both cross-sectional data and time series data to arrive at the findings. The study used independent, dependent, and five control variables. The authors estimated linear regression models in their study to measure the relationship between corporate governance and performance.

However, the article raised the issue of impact of corporate governance practices and its adoption on companies’ market performance and financial operational performance. Financial performance was based on return on equity and market performance (Buallay et al., 2017). The article concludes that the governance level in Saudi stock exchange is 61.4 percent, which was an improvement. The authors also found no significant effect for corporate governance adoption on the financial and operational performance of the companies.

References

Buallay, A., Hamdan, A., & Zureigat, Q. (2017). Corporate governance and firm performance: evidence from Saudi Arabia. Australasian Accounting, Business and Finance Journal, 11(1), 78-98. https://ro.uow.edu.au/aabfj/vol11/iss1/5/

Keown, A. J., Martin, J. D., & Petty, J. W. (2017). Foundations of finance: The logic and practice of financial management (9th ed.). Upper Saddle River, NJ: Prentice Hall. ISBN 13: 9780134083285