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ACC 230 Week 3: Analyzing the Misleading Nature of Net Income: Case Study of Enron and the Importance of Financial Ratios

A case study on Enron, highlighting the importance of financial ratios in evaluating net income.

Benjamin Fisher
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ACC230Week3:AnalyzingtheMisleadingNatureofNetIncome:CaseStudyofEnronandtheImportanceofFinancialRatiosACC230WEEK3DQ2DiscussionQuestion2-DueDate:Day4[Mainforum]-ProvideanexamplefromthetextortheInternetthatdemonstratesasituationinwhichacompany’snetprofitslookedgoodinthestatements,butthegrossoroperatingprofitspresentedadifferentpicture.Discusshowthismighthaveoccurred.-RespondtothequestionaddressedinProblem3.6onp.109(Ch.3):“Whyisthebottom-linefigure,netincome,notnecessarilyagoodindicatorofafirm’sfinancialsuccess?”(Hint:Lookforindicatorslikeliquidityorsolvencytoanswerthisdiscussionquestion.)Enronisaclassicexampleofthis.Enron'snetprofitslookedgoodinthestatementstoinvestorsandwallstreetwhointurnendorsedthecompanyanddroveupit'svalue.Now,thatbeingsaidtheoperatingprofitspresentedadifferentpictureanditturnedoutthecompanywasinflatingtheprofitwhichwasmntindinntivnafthoannrntingnrafiteCavanmad~DisCivnannuntingfeminardoraaannmnlichthis+StudyXY

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Document Details

University
Hult International Business School
Course
ACC 230
Subject
Accounting

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