Collapse of Enron - 4178 Words

THE COLLAPSE OF ENRON August 11 2008 [Type the abstract of the document here. The abstract is typically a short summary of the contents of the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.] FROM PERSPECTIVE OF CORPORATE GOVERNANCE TABLE OF CONTENTS CONTENTS PAGE NO. Introduction 3 Background of Enron 3 Enron Business Model 4 Summary of transactions Partnerships 5 Corporate Governance Issues 8 Post-Enron Governance Reforms 12 Conclusion 13 INTRODUCTION The secret of success is honesty and fair dealing, Mark Twain, once said. If you can fake these, you ve got it made.†¦show more content†¦Enron went a step further. It entered into separate contracts with both buyers and sellers in a contract, making a profit on the difference between the two quotes. The general lack of federal controls and monitoring of energy trading enabled Enron to keep its books shut. Of the three sides involved in energy-trading contracts, only Enron knew both sets of prices. Over time, Enron began to design more complex contracts - essentially derivatives purportedly aimed at hedging risks arising out of uncertainties in interest rates or currency fluctuations. Since Enron s collapse, it has been revealed that the company employed a battalion of doctorates in mathematics, physics and economics to manage these complex contracts. Between 1996 and 2000, Enron s sales increased from $13.3 billion to $100.8 billion. These were far above revenues generated by other large American companies such as Microsoft, General Electric or Exxon Mobil. Enron was described by an analyst as a giant hedge fund sitting on top of a pipeline. While its revenues were boosted through innovative accounting practices, its operating margins were rather thin - about 5 per cent in 2000 and 2 per cent in 2001. Its return on capital in 2001 was just 7 per cent - rather low in the highly risky business of hedging. Consequently, while revenues were successfully inflated by ingenious accounting devices, Enron s profitability was never as high. Wall Street analysts, tuned to theShow MoreRelatedEnron And The Collapse Of Enron1254 Words   |  6 Pagesbelow one dollar. This happened to shareholders of Enron. The total debt amounted to over $ 16 billion, which was the largest corporate bankruptcy in American history. Shareholders lost 60 billion dollars within a few days, 4500 employees lost their jobs, and the employees lost billions in pension benefits. I had never heard the name of Enron nor Enron’s scandal until I watched a film, â€Å"Enro n: The Smartest Guys in The Room,† but I realized the Enron scandal affected the whole of the business in theRead MoreEnron And The Collapse Of Enron1303 Words   |  6 PagesEnron, a company which originated in Huston, Texas, was one of the largest American energy trading corporations in the nation. Although it was one of the most well known companies, it was also one that crashed and burned the fastest, shocking many people when it did. Not only did it end fast, the company caused quite a scandal which is still being discussed and reviewed in today’s world. Enron’s bankruptcy scandal was so widely known because of the many people who associated themselves with the companyRead MoreThe Collapse Of Enron And Enron1736 Words   |  7 PagesAbstract Fortune used to rank Enron as the most successful business in the United States. The collapse of Enron was shocked the whole world energy trading market. 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In this paper, it describe the reason why Enron became an admired company in the world, the story of Enron s rise and fall, the iss ues of internal and external auditing in Enron, the breachesRead MoreFinancial Collapse : The And Enron1320 Words   |  6 PagesOneTel and Enron were huge technology companies, dominating the competition that they faced although - everything changed. Both of these companies operated in the same era, coincedently both suffering financial collapse. The reasons were mainly because of the failure to follow major accounting principles, lacking morals and lacking strong work ethics. If even a major corporation can fall into this â€Å"trap†, then avoiding doesn’t sound easy, although accountants can easily avoid scandals by followingRead MoreThe Collapse Of Enron Corporation1547 Words   |  7 Pagesdownfall of the Enron Corporation and how the collapse of Enron Corporation consequence affected the United states financial market. Enron Corporation was the seventh largest company in the United States, and had the biggest audit failure. In this Research paper, it describes the reason of Enron Corporation collapse, including details of the internal/ external management, accounting fraud, and conflict of interest. Enron is the largest bankruptcy in America history! The Collapse of Enron CorporationRead MoreThe Collapse Of Enron Corporation1787 Words   |  8 Pagesâ€Å"When a company ascends to the number seven spot on the Fortune 500 and then collapses in weeks into a smoking ruin, its stock worth pennies, its CEO, a confidante of presidents, more or less evaporated, there must be lessons in there somewhere.† -Daniel Henninger, The Wall Street Journal The collapse of Enron Corporation has created many discussions about the structure of corporate governance. The question of this essay first calls to examine some of the strengths and weaknesses of the