One Way Enron Manipulated Its Financial Statements Was to Sell

question 107

Multiple Choice

One way Enron manipulated its financial statements was to sell assets at inflated prices to other firms,while giving a promise to buy back those assets at a later date.The incoming cash was recorded as revenue,but the promise to buy back the assets was not disclosed.Which of the following is one of the ways that such a transaction is deceptive?

• A)The assets should have been listed on the balance sheet as long-term assets.
• B)Cash raised by selling assets should not be recorded as revenue.
• C)The cash raised should have been recorded as short-term loans.
• D)The off balance sheet promises to repurchase assets should have been disclosed in management discussion and analysis (MD&A)or notes to the financial statement.
• E)The promise to buy back the assets should have been listed under accounts payable.

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Definitions:

Morally Illegitimate

Refers to actions or practices that are deemed unethical or not acceptable based on societal norms and moral principles.

Marketing Activities

The actions or tactics undertaken by a company to promote and sell its products or services, including advertising, selling, and delivering products to consumers.

Losing Right to Operate

The risk of a business losing its legal or social license to operate due to non-compliance with regulations or societal expectations.

Corporate Social Responsibility

The commitment of a business to contribute to sustainable economic development by working with employees, their families, the local community, and society to improve their quality of life.