Enron and finances

We talked a lot about about Enron in the past class and we just skimmed the topic of their financial statements.  Most of our discussion was about their ventures into other markets and how they were able to do that, but I think a large part of the Enron case is their inability to report their finances correctly.  Reporting a company’s finances is a large part of doing business today, and doing the financial statements is even more of a recent and prevalent issue.  Many companies add money to their revenues or try to hide their earnings or cash intake in some way to lessen their taxes or just look more attractive to shareholders or investors.  Enron was far off in reporting their finances, and because of the Enron scandal and others, Sarbanes-Oxley exists today.  Without the regulation of corporate finances and financial statements for businesses, where would we be in the world today? What would companies be like without the need to correctly identify where their money is coming from and where it is going? This is an interesting and relevant topic in today’s economy and corporate environment.

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5 Responses to Enron and finances

  1. Alyssa Haglund says:

    The financials of a company are extremely important to all those involved with the company. Enron deceived the world with theirs and I agree that this is still definitely a major concern today. Rumors started in January that the SEC would force Facebook to go public and display its financial records. The SEC believes that once Facebook hits the 500 shareholder mark, they should go public in order to help and protect the shareholders. The question now is if the SEC should actually be able to force a company public? Or even private, like William R. Gruver suggests with Wall Street?

    • cea008 says:

      As far as being coerced into going public or private, I think it depends on the regulation in place. Gruver makes a solid point in that if investment bankers are playing with their money, their going to take a lot less risk. In turn this would help the systemic problem regarding the interconnectedness of Wall Street. I think it might be a matter of setting a limit on the size of your assets in relation to how much much is owned internally v. publicly.

  2. mnickels says:

    It seems like it would be difficult to have regulations on when a company should go from private to public. If the SEC were to put a limit on the amount of shareholders that a private company can have and make them go public if they go over their limit, that might work in some instances. No company is the same though and it might not be a good idea for a private company to go public in some cases, so it is hard to generalize things. In the case of Facebook, maybe the SEC was right in making Facebook go public (as rumor would have it), but if they did have a say, will they need to have say in other companies after them? If you have a regulation on assets, it would also be difficult to generalize for all companies since each is different. Apple has an absurd amount of cash and not as many other short-term assets, but another company may have many long-term assets compared to short-term. It’s hard to compare companies overall but especially using their financial statements I think.

  3. knr004 says:

    I agree with the posts above that forcing a company into going from private to public is difficult, and personally I don’t think it’s right. Every company is different in the ways it operates, and every company has a different set of values. What happens when forcing a company to go public results in their downturn. In corporate finance, I spent the semested researching Jones Soda Co who many have probably never heard of. The company was very successful but as soon as they went public they went astray. They didn’t know how to appropriately use the new fund they had attained and they ended up blowing a lot of green! Going public is all about timing and planning, you can’t force a company into something like that. Management has to be well suited and prepared for something like that.

  4. Pingback: Revisiting Enron | Biz Gov Soc

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