Enron Bankruptcy Analysis

Lavish Corporate Expenditures
Another reason for Enron’s bankruptcy was the unnecessary personal spending by corporate managers. It was a direct loss to the company’s shareholders. In the later stages before its bankruptcy, the luxuries were paid from the company’s borrowing, as it had no real profits. Therefore in the later stages, the creditors were at a loss rather than its shareholders.
One of the most common expenses was corporate airplanes. Such travel arrangements cost many fold compared to a commercial airline. The cost per hour would be close $5000. Moreover, these aircrafts would not carry any other passengers except for the corporate managers and would take them to their destination and fly them back. This put the entire cost of the aircraft on

However, the company does not cease to exist. In order to pay the deferred dues to its creditors, the court takes charge of the company’s assets and disposes them to satisfy the company’s debt. Enron had billions of dollars worth of assets. Some of the assets, like the Dabnol power plant in India, were white elephants. The problem was that its liabilities were more than its assets. It also had never ending cash flow problems. A white elephant asset is one which has no value at present but it is potentially valuable in the future. In 1999, Enron started raising cash by selling off its assets. Jeff skilling sold Enron’s 53% of interest in Enron Oil and Gas Company as it was one of the business units that was producing cash and was a marketable asset. Though the sale helped the company, other various projects of the company were burning cash at hundreds of millions of dollars. In 2000, Jeff Skilling tried to sell Enron’s herd of white elephant assets worth more than 7 billion to venture capitalists in the United Arab Emirates, but the deal fell