Custom «Down fall of Enron» Essay Paper Sample
The down fall of Enron Corporation in 2001 had lasting effects that could be felt even to this date. Enron’s downfall was occasioned by the lack of proper ethical business procedures (Ferrell et al., 2005). This fall led to the job loss for many employees with others losing their pensions and retirement benefits. People who thought that they would be in a position of retiring have been forced to look for another appropriate job and stay for more time in the workforce (Fusaro and Miller, 2002). Many have taken part in lawsuits in which they are endeavoring to recoup a portion of their savings that were lost. Billions of money were lost by shareholders when the stock price plunged.
After what seemed to be a flourishing moment for Enron, the company ran into liquidity issues after it came to the point of acquiring finances needed to fund some new projects they had invested in. The balance sheet of the company was already ridden with an accrued debt owing to the starting costs of the company and more debt that was acquired and that would be harmful to their bonds rating (Fusaro and Miller, 2002). If they gave out much more common stock, they would have consequently diluted their stock price and largely reduced the total earnings per share. These instances would turn out to be a bad exposure, which could damage their public image and future ability of acquiring capital as a business in energy trading. Their objective was to prove to the community of investors that they were not an insolvent and unstable company. All of these occasions made Enron search for other ways to finance new projects.
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The pressure increased to maintain favorable figures of earnings on paper hence creating an environment for a fraud. Enron fraudulently used Special Purpose Entities, commonly known as SPEs that made it possible for them to raise capital without harmfully affecting their rating and bond or credits (Fusaro and Miller, 2002). Shareholders, auditors, the public, executives, employees and other various stakeholders are still handling the impact of this down fall created by Enron which was caught with a debt ridden through misconduct.