ACC 230 Week 3: Analyzing the Misleading Nature of Net Income: Case Study of Enron and the Importance of Financial Ratios ACC 230 WEEK 3 DQ 2 Discussion Question 2 - Due Date: Day 4 [Main forum] - Provide an example from the text or the Internet that demonstrates a situation in which a company’s net profits looked good in the statements, but the gross or operating profits presented a different picture. Discuss how this might have occurred. - Respond to the question addressed in Problem 3.6 on p. 109 (Ch. 3): “Why is the bottom-line figure, net income, not necessarily a good indicator of a firm’s financial success?” (Hint: Look for indicators like liquidity or solvency to answer this discussion question.) Enron is a classic example of this. Enron's net profits looked good in the statements to investors and wall street who in turn endorsed the company and drove up it's value. Now, that being said the operating profits presented a different picture and it turned out the company was inflating the profit which was mnt indinntivn af tho annrnting nrafite Cavan mad ~ Dis Civ nannunting fem in ardor a aannmnlich this + StudyXY Downloaded from StudyXY.com ® + StudyXY Sd Ye. o> \ | iF ’ pr E \ 3 S Stu dy Anything This ContentHas been Posted On StudyXY.com as supplementary learning material. StudyXY does not endrose any university, college or publisher. Allmaterials posted are under the liability of the contributors. wv 8) www.studyxy.com