Correct Answer: External Analysis

Solution : Financial statements offer a picture of the state of a company's finances at a specific period and offer information on its operations, profitability, cash flow, and general health. Financial statements are necessary for shareholders to make educated choices regarding their equity investments, particularly when it comes time to cast votes on corporate issues.

Shareholders have access to a number of instruments for performing these equity analyses. They should assess their stocks using a number of measurements rather than just a few in order to make better selections. Profitability ratios, liquidity ratios, debt ratios, efficiency ratios, and pricing ratios are some of the measures that are available.

Hence shareholder's analysis of financial statements is an illustration of  External Analysis.

Hence the correct answer is Option 2.