Why enron stock dropped so dramatically in such a short time

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Question: Enron Corporation, headquartered in Houston, Texas, provides products and services for natural gas, electricity, and communications to wholesale and retail customers. Enron's operations are conducted through a variety of subsidiaries and affiliates that involve transporting gas through pipelines, transmitting electricity, and managing energy commodities. The following data were taken from Enron's December 31, 2000, financial statements.

In millions

Total revenues                                                            $100,789

Total costs and expenses                                                 98,836

Operating income                                                             1,953

Net income                                                                       979

Total assets                                                                  65,503

Total liabilities                                                               54,033

Total stockholders' equity                                                11,470

Net cash flows from operating activities                               4,779

Net cash flows from investing activities                             (4,264)

Net cash flows from financing activities                                 571

Net increase in cash                                                        1,086

At the end of 2000, the market price of Enron's stock was approximately $83 per share. As of April 17, 2005, Enron's stock was selling for $0.03 per share. Review the preceding financial statement data and search the Internet for articles on Enron Corporation. Briefly explain why Enron's stock dropped so dramatically in such a short time.

Reference no: EM131526338

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