Business Failure Reasons - Essay Example

Enron Corp. was the result of a merger between Houston Natural Gas and the Internet. There was a shift to unregulated energy trading markets from regulated transportation of natural gas. Enron was a Fortune 500 company and was #7 in 2001 and was deleted from New York Stock Exchange. According to the managers of Enron who reviewed the accounts of the company, during the California energy crisis, Enron kept undisclosed reserves of up to $1.5 billion in trading profits.

Enron came under fire from politicians for price gouging. The hidden reserves would have doubled Enron’s reported profits. It is also reported that Enron manipulated reports on reserves to have steady profit growth for Wall Street and credit rating agencies. The executives also claimed that the reserves were held back and used to fulfill political and financial ends.

In 1990, Enron reported its total revenue as $10 billion and in the next subsequent ten years it grew by $101 billion. It emerged as one of the fast-growing companies in the United States. The main reasons for its collapse are not due to the core energy operations but the company’s new ventures in the dot com sector and investments Internet and communication business.

Investigators of the security of exchange commission have gone in to investigate the case, and have interviewed witnesses to conclude that the methods or practices violated the laws for doctoring quarterly earnings refers to starting cookie jar reserves. The existence of Enron reserves puts a strange twist on it. Having a foolproof monitoring system could have controlled this type of manipulation and doctoring.

The executives of Enron inflated profits and concealed losses with the official balance sheets. Partnership in this scenario of reports that Enron has shown wrong accounts in December 2000, the company filed for bankruptcy protection but interviews with more than a dozen ex-Managers and Executives revealed that Enron many a time paid the profits on trading to meet the needs of politicians and financiers.

It’s the research and analysis done by the economists in investments (FDI) yielded fruitful results in the development of different industrial sectors. The main purpose of these industries is to develop products that could be used in everyday life and produce more and more employment opportunities. Any misconduct by them will result in heavy losses.