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Ethics in Accounting - Enron (History and Background of Enron) - Essay Example

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The rise and fall of big companies around the world has been as a subject of research and investigation since such cases provide valuable business and accounting lessons. One such company is Enron, whose failure led to massive losses to investors, banks and insurance…
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Ethics in Accounting - Enron (History and Background of Enron)
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Download file to see previous pages Lay was named the chief executive officer in 1986. This is when the company adopted the name Enron Corp. During the merger, Enron had incurred a huge debt and lost its executive rights to pipelines as a result of deregulation. In 1987, the company realized that it had made a loss of close to $ 1 billion, it worked the loss down to $ 142 million, and the loss made the company adopt a different strategy in order to cushion itself against price fluctuations (Lucian & Cristina, 2007).
Jeff Skilling, a consultant hired by the company, came up with a new business plan that would help the company generate earnings. This new approach called for the creation of gas banks where Enron Corp bought gas from different suppliers and sold it to consumers (Thomas, 2002). Enron assumed the associated risks. The company started to venture into other business areas beyond the natural gas and pipeline. This saw Enron become a financial trader as well as market maker in various products and services including water, broadband, coal, power, and steel among others. In 1992, the Enron extended its operations to South America through the acquisition of Transportadora de Gas del Sur. By 1993, the company’s power plant in England began to operate.
By the late 1990s, the company had started to implement a number of innovations that would help to lower the cost of electricity and gas by almost 50 percent. In 1994, the company did its first electricity trade which proved to be profitable. In 1995, after the establishment of a trading center in London, Enron ventured into the European wholesalers market. The construction of the Dabhol power plant to be located in India started in 1996, although the project was later abandoned and put up for sale due to political reasons. During the same year, Skilling was made the chief operating officer for the company. He managed to convince Lay that the gas bank model he had introduced could be applied to electric energy ...Download file to see next pagesRead More
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