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Enron, An Energy Trading Supply Company Essay

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Enron, an energy trading supply company, founded in 1985 was the product of a merger between the Houston Natural Gas Company and InterNorth Incorporated. Enron was able to flourish as a result of the Dotcom Bubble, a rapid rise in equity markets caused by investments in internet-based companies in the 1990s. Hoping to wreak more revenue through additional utilization of internet-based strategies, Enron created EOL, Enron Online, a computerized trading website. By the early 2000s, EOL was generating approximately $350 billion in trades. EOL’s success fueled Enron’s ambitions to create a broadband telecommunication network worth hundreds of millions of dollars. However, unlike EOL, this costly telecommunication network yielded minimal profits. Devastatingly, the financial blow was accentuated by the emergence of the Great Recession. After Enron’s fatal losses, the company began to deteriorate rapidly. The CEO at the time, Jeffrey Skilling, attempted to save the company by hiding its financial losses through the use of market-to-market accounting. This particular accounting technique is characterized by recording prices of assets to resemble their current market value rather than the book value, net asset value. For example, Enron would build an asset and claim the projected profit (current market value) even though the asset had not yet produced any such profits. If the earnings of the asset were less than the claimed current market value that was projected, the company
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