In Order to Ensure an Investment-Grade Credit Rating, Enron Began

question 2

Multiple Choice

In order to ensure an investment-grade credit rating, Enron began to emphasize the following three actions:

• A)Reducing accruals, increasing cash flow, and lowering debt
• B)Smoothing accruals, increasing cash flow, and lowering debt
• C)Increasing cash flow, lowering debt, and smoothing earnings
• D)Increasing cash flow, lowering earnings and decreasing option expense
• E)Increasing cash flow, lowering debt, and decreasing option expense

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Definitions:

Economic Profit

The profit a company makes after deducting both explicit and implicit costs, reflecting the total opportunity costs of its resources.

Implicit Costs

The opportunity costs of using resources that are owned by the firm or entrepreneur for one purpose instead of another, not directly paid out in cash.

Entrepreneur's Talent

is the unique skill set, creativity, and capacity to innovate and take risks that an entrepreneur brings to the economic table, instrumental in starting and growing businesses.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the financial gain exceeding the opportunity costs of resources.