• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

The collapse of energy giant Enron.

Extracts from this document...


Enron was born on July 1985, when Houston Natural Gas merged with InterNorth natural gas Company based on Omaha, Neb, and Kenneth Lay who became Enron's CEO in February 1986. In 1989, Enron began trading natural gas commodities. The company eventually became the largest merchant in North America. Enron had 21 thousand employees, operated a 25 thousand-mile gas pipeline system. It was listed as the seventh-largest company in the U.S, with a revenue of nearly 101 billion of dollars. Its bankruptcy occurred on December 2, where Enron had listed 24.7 billion dollars in assets. The collapse of energy giant Enron is the largest bankruptcy and one of the most shocking failures in United States corporate history. It embraced new technologies, established new methods of trading in energy and seamed to be a shining example of successful corporate America. But the company's success, were based on artificial inflated profits, dubious accounting practices, and some say fraud. ...read more.


First of all, Enron matched employee contributions with substantial amounts of its stock and prohibited employees from shifting that company contributed stock to a different investment until the age of fifty. Second of all, the company's culture actively encouraged accumulation of Enron stock. Enron's top management repeatedly promoted its stock through internal publications and communications. Leaving the question of legality aside for now, it is wrong for executives to enthusiastically recommend their company's stock into their savings. It is wrong for management to convey in internal communications that the company's stock is on the way up when they have reason to believe otherwise. That is not optimism. It is dangerous deceit. As Enron's original divisions continued to rack up financial losses, company leaders devised new schemes to hide the red ink from ever hitting the paper and thus causing their precious stock prices to plummet. ...read more.


This declaration of bankruptcy was the largest in United States History. The last people who are affected by this are the general public who was being provided with electricity by Enron. These people are also investors who lost money in the company. A lot of people are in huge financial debt from the ignorance of these executives at Enron. Ten's of thousands of people saw their pension and investment accounts depleted or destroyed. This scandal has had an enormous impact. If the Enron scandal had never happen and if they would've been extremely strict, they might still be one of Americas top companies and produces billons of dollars. All in all it is clear that the Enron scandal has changed the business world, as we know it. It taught us that even the biggest could come tumbling down at a fast rate. We know how politics, business, and greed all go hand in hand unfortunately and how corrupt corporate America is. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Accounting & Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Here's what a star student thought of this essay

4 star(s)

Response to the question

In summary, the report is well written. The report states how Enron was a large buisness and the types of financial polices that there undertook. The student also understands the effect on this to their employees and investors. However some ...

Read full review

Response to the question

In summary, the report is well written. The report states how Enron was a large buisness and the types of financial polices that there undertook. The student also understands the effect on this to their employees and investors. However some points lack detail and the student should link this to potential accounting polices which could have prevented this buisness from going bankrupt. The student states 'Enron was born', although businesses cannot be born. Businesses are created, and this is a strange use of English within the report. This should be corrected to 'created'. On the flip side, the student does state good background knowledge of Enron, which will allow the exmainer to understand the size/scale of the buisness. The student understands that their employees lost their pension savings though the buisness, and there wouldn't be able to claim any of this back, as there wasn't enough assets within the buisness. The report states a number of changes that have occurred within the USA, due to this business. This shows a good understanding of how one company, made the government change a number of laws to ensure that this couldn't occur again.

Level of analysis

The student understands that the buisness had poor accounting standards, and there was no profits being generated within the buisness. Although the student doesn't state the potential reasons for this, and doesn't give reference to any accounting policies which could have prevented the errors within there financial statements. The report states that the directors of the buisness, promoted their stock and this increased their share price. Although the report hasn't given any examples of this. It may be useful to include the people involved and the amounts that the share price increased by, and how this effected other investors.

Quality of writing

The font size is too large, this should be between 10 - 12. Although I'm assuming that this is either 14 or 16. This should be corrected, as the exmainer may find it slightly too large to read with ease.

Did you find this review helpful? Join our team of reviewers and help other students learn

Reviewed by danielbeal 05/04/2012

Read less
Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Accounting & Finance essays

  1. In this assignment I am opening a tuck shop in the school grounds and ...

    My revenue will be coming from the goods I sell. Before I can get my revenue I need to get some money to start my tuck shop up. I will consider having a short-term finance because the business I am opening will just be small business so I will need to have very little money.

  2. Discuss the Need for Regulation in Financial Reporting

    This is to prevent exaggeration of profit. Provisions should be made for all known liabilities using the best estimate available for the size of the liability. The conventions include the business entity which states that the business must have a separate identity from its owners; duality convention which is enforces

  1. Compare the two companies Tesco's and McDonalds

    and create barriers to enter the market. McDonalds have four major aims and objectives as far as the environment is concerned: 'Conserving and protecting natural resources' 'Encouraging environmental values and practices' 'Effectively managing solid waste' 'Ensuring accountability procedures' McDonalds first opened in 1974.

  2. The business plan

    to satisfy consumers needs and wants. E.g. From my observations of my competitor analysis I have found that the competitors charge around 35p for a packet of Walkers crisps. But I will only charge 20p-30p. Eventually all the prices I decided are neither more nor less for most customers (See Appendix 1.4).

  1. Hampton Machine Tools Company Case

    The cash budget of the company was also projected and adjusted to find how and when the company could have the cash to pay its debt/s. a. Exhibit B.1 shows the cash budget of the company based on the terms presented by them, that is, proceeds of the loan

  2. Wilson Lumber Company Case

    Required Resources Investment 324082.8025 Annual Percentage Increase in Sales 1983 1984 1985 (with P2.5 million sales) 1985 (with P2.091 million sales) Percentage Increase 18.62% 33.81% 32.70% 11.0% Cash Budget (2.5 million sales) January February March April May June July August September October November December Cash Receipts Sales 187500 187500 229167

  1. What are the major risks that financial intermediaries face and how do they manage ...

    risk exposure of a financial intermediary on a day to day basis. There are five reasons why it's really important to measure market risks by financial intermediary the first one is management information. This is when the management of the financial intermediaries take a look at the way its traders

  2. Comsat case

    percent.3 The difficulty with determining a risk premium is that business and financial risks vary according to time and industry. Premiums are also affected by investors' risk aversion. These problems with calculating the risk premium create a greater degree of variability.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work