This website uses cookies to ensure you have the best experience. Learn more

The Failure Of The Enron Corporation

1369 words - 5 pages

To explain the causes of collapse for Enron, you must first examine the company history till its downfall and what it actually did as a company.Enron was formed in July 1985 form the merger of two large natural gas line companies called Internorth and Houston Natural Gas in the US. The company began trading natural gas commodities in 1989 and electricity in 1994. The company made extensive use of the internet to broker sales and quickly became a powerhouse in the natural gas and electricity markets. Beginning in the mid 1990s the company tried to build upon its earlier success in the energy markets by expanding into other more speculative markets and diversifying into global commodities trading.The key to understanding Enron's collapse is to know what the company actually did.The initial product markets in which Enron moved were gas and electricity supply in which they fought hard for deregulation so they could compete further across the US. This deregulation meant that Enron's initial successes led to a flood of fresh entrants into the field i.e. more competition. This contributed to a reduction in Enron's business margins no mater however efficient Enron's trades were. Declining returns meant its trading margins collapsed and therefore sales growth did not translate into higher profits. This meant that Enron was not as profitable when actually trading specific gas and electricity products. As the asset based markets declined Enron moved to function primarily as a "middleman," buying and selling energy contracts between suppliers and companies that delivered this energy to consumers. It also decided to branch out into water supply and technology networking brokerage i.e. internet band width brokering. This meant that Enron had very few business assets and had to trade upon trust.The decline in Enron's profits led to its managers adopting special techniques some of them questionable to boost profits in their published accounts. This was done to support Enron's previous track record were gross sales per year had been up to $200bn. This meant Enron's managers came under increasing pressure to sustain their profit margins and to do this they specifically miss stated the profits from asset sales as trading gains.The reasons why Enron could do this were that it was a most unusual company even when things appeared to be going well. It was acting as a huge, unregulated trading company in effect, an investment bank that escaped all the normal prudential and conduct of business rules. It did this by confining itself to un-regulated markets and was thus not classified as a bank, insurer or fund manager. It went to great lengths to ensure that its trading continued to escape regulation even up to the point of donating huge amounts of money to its political interests in the White House.This meant that even its auditors, Andersons came in to check Enron's books they were under great pressure for them to read appropriately to financial market expectations....

Find Another Essay On The Failure of the Enron Corporation

Ethical Accounting Failure: The Enron Scandal

1381 words - 6 pages According to Croxford” Ethical accounting failure has continued to occur in multinational companies in spite of the increased legislation, enhanced corporate governance programs, and greater attention on business ethics by the academic community.” (Croxford, 2010) According to his research, (Croxford, 2010) believed “that accounting professional was discriminated against based on their age, culture, gender, and education.” Multinational

THE FALL OF ENRON Essay

716 words - 3 pages began to design increasingly varied and complex contracts. Customers could insure themselves against all sorts of eventualities such as a rise or fall in interest rates, a change in the weather, or a customer’s inability to pay. By the end, the volume of contracts to actually deliver commodities, and Enron was employing a small army of PhDs in mathematics, physics and economics to help manage its risk. The Failure of Enron As its services became

The Downfall Of Enron

2073 words - 9 pages , had formally denied these withdrawals from the corporation as having to do with any financial issues, saying that “there were no "accounting issues, trading issues, or reserve issues" at Enron” (Helyar). Regardless, it was believed that Skilling had already suspected the imminent failure and exposure of the company, opting to leave it all behind him in order to avoid consequence. Before long, many major shareholders, including Enron’s own

The Fall of Enron

1041 words - 5 pages The film Enron: The Smartest Guys in the Room was a great film loaded with examples of unethical behavior with Enron being an unethical corporate culture. The film portrays the rise and fall of Enron, one of the most corrupted corporations this country has seen. Enron had started off as a promising energy company with a vision to do good which quickly turned sour when top executives torn the company down while stealing millions of dollars from

The Collapse Of Enron

1092 words - 5 pages On the 2nd of December 2001, Enron, at the time the seventh largest company in the US, filed for Chapter 11 becoming the biggest bankruptcy in any industry anywhere with losses around the $60B mark. The company's share prices fell from a high of $90 in August 2000 but were trading on the markets at about 45 cents.Enron started life as a regional gas pipeline company in 1985, but by 2001 it had become the world's largest energy trading company

The Beginning of the End of Enron

2097 words - 8 pages fraudulent accounting procedures to defer attention from the company’s financial performance. Enron Corporation, a natural gas provider, led the pack with dubious accounting practices, a series of off-balance sheet transactions, and a series of investigations that ultimately led to beginning of accounting reform

The Failure of Chartism

848 words - 3 pages The Failure of Chartism For the chartist to have had a focus, they would all have to have had the same issues, and all held equal support for all 6 parts of the people’s charter, the paper behind the chartist movement. This was not the case; in many instances the people would only support something when it suited them, a knife and fork issue, this was the cause for the collapse in the movement. In source one it does say how people wanted

The Failure of Reconstruction

770 words - 3 pages The Failure of ReconstructionIn 1863, the Emancipation Proclamation gave freedom to all of the blacks. However, the road to freedom for the blacks was still going to be a long one and would not start until after the end of the Civil War. The Reconstruction definitely failed in bringing social and economic equality to the blacks because of; the failure of the Freedman's Bureau, the blacks were kept from voting, and they were treated unfairly.To

The Failure of Reconstruction

679 words - 3 pages Shannon, The original purpose of Reconstruction was to restore the buildings and the economy of the south the best they could, but without the immoral element of slavery. But, reconstruction under the Johnson Presidency was a failure for a few reasons: 1) Convict Leasing, 2) Sharecropping, 3) the Ku Klux Klan, 4) Segregation in schools, even in the North, 5) Carpetbaggers/Scalawags, 6) misleading statistics, and 7) racism. Convict Leasing

the failure of communism

2117 words - 9 pages The failure of communism Communist had a long history during the 20th century, and communism was very influential. Almost all of Asia and East Europe became Communist. From the start of the theory then many civil wars in Russia affected the whole world. Communist defined the idea of itself in many different ways, it helps many nations came together formed a party fought wars, but it also made many countries became really poor, and the economy

Failure of the Volksgemeinschaft

1279 words - 5 pages During the rise of the Third Reich, the Nazi regime poured all of their effort into creating the utopian Volksgemeinschaft, or people’s community, in order to rectify the economic collapse and dispirited morale in Germany after being defeated in World War I. The start of World War II however, made the realization of the Volksgemeinschaft problematic. Some of the problems that arose during this time that made this idea difficult to put in affect

Similar Essays

The Enron Scandal: The Downfall Of The Enron Corporation

1270 words - 5 pages customer's inability to pay. By the late 1990s, the Enron Corporation controlled almost 25 percent of all electricity and natural gas contracts traded worldwide and were considered the best in the business.Three important factors that led to the decline of the Enron Corporation were poor accounting practices or "creative accounting", unorthodox human resources management, and greed among management and traders. Unfortunately, the focus of the

"Enron Collapse": The Causes For The Collapse Of Enron Corporation

983 words - 4 pages The fall of the colossal entity called Enron has forever changed the level of trust that the American public holds for large corporations. The wake of devastation caused by this and other recent corporate financial scandals has brought about a web of new reforms and regulations such as the Sarbanes-Oxley Act, which was signed into law on July 30th, 2002. We are forced to ask ourselves if it will happen again. This essay will examine the collapse

Enron Corporation: The Real Scandal Essay

1315 words - 5 pages company and their credit rating was reduced to junk status. The company had very little cash to operate. Stock prices then fell to $0.61 at the end of the day. Systematically Enron creditors and other energy trading companies suffered great losses. The new question came to mind of how to determine the total exposure of Enron’s failure. Enron was estimated to have $23 billion in liabilities. Enron’s European operators filed bankruptcy on November 30

The Impact Of Ethics On The Enron Corporation

1852 words - 7 pages on the industry. "But it's crucial to learning how the company fell so far so fast, taking with it the jobs and pension savings of thousands of workers and inflicting losses on millions of individual investors." (Kadlec, 2002) Unethical decisions made by the Chairmen of the Enron Corporation stunned the energy industry and the world. Enron's business ethics were nowhere in site when "the Oct. 12 memo directed workers to destroy all audit