Analysis of Youtus Enterprise Case Study

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Name of the Student
Name of the University
Author’s Note

1ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Introduction................................................................................................................................2
1. Discussion on the Three Possible Reasons............................................................................2
2. Cost of Funding......................................................................................................................2
3.a Justification for the Firm’s Action.......................................................................................3
3.b Practical Example of Corporate Intervention.......................................................................3
4.a Argument for Equity Shareholders.......................................................................................4
4.b Lease Capitalization Agreement..........................................................................................4
Conclusion..................................................................................................................................5
References..................................................................................................................................6

2ADVANCED FINANCIAL ACCOUNTING
Introduction
This report undertakes the analysis of the provided case study of Youtus Enterprise
(Youtus). After that, this report sheds light in the reasons that lead to the presence of better
information system, corporate governance and change in business status. Then, this report
discusses about certain aspects of both debt financing and equity financing. This report
undertakes the analysis of certain theories such as positive accounting theory and agency
theory for analysing the aspects like lease liability and others.
1. Discussion on the Three Possible Reasons
Positive Accounting Theory takes attempts for making good predictions of real world
events in order to translate them to accounting transactions (Christensen, Nikolaev and
Wittenberg‐Moerman 2016). A better accounting information system will assist Youtus in
collecting, storing and processing financial and accounting data for the development of
informational report that the Board of the firm and investors can use for effective decision-
making and this is the key reason for Youtus (Ismail and King 2014). After that, the main
reason behind the implementation of an effective corporate governance framework is that it
enhances the company’s accountability towards their investors so that massive frauds or
disasters can be avoided before their occurrence. Lastly, the key reason for Youtus for
changing the business status is to ensure issuing adequate number of their company shares for
raining the requite capital for business expansion.
2. Cost of Funding
Cost of funding can be considered as the specific costs that the companies are needed
to incur at the time to raise funds from debt or equity financing. In the case of debt financing,
cost of funds is referred to the interest paid by the companies for the funds they have
borrowed in order to raise capital. Thus, the lowest cost of funds leads to better returns. This