Please preview the keynotes for this unit.

This unit focuses on aspects of finance. Ss may find following background knowledge useful for their study of this unit:Profit and loss account (UK) / Income statement (US): statement showing sales, costs, expenses and profit for an accounting period, eg a year.Balance sheet: statement of the assets owned by a business and how they are financed from liabilities and shareholders’ funds; a snapshot of the assets at a particular moment.EnronEnron, a Houston-based energy firm founded by Kenneth Lay, transformed itself over a 16-year period from an obscure gas-pipeline business to the world’s largest energy-trading company. Encouraged by deregulation, the company turned to electricity to supplement its natural-gas business. It also tried to buy into the water business. Enron was successful for a long time but then ran into difficulties. Its attempted entry into California’s retail electricity market was problematic. The company’s 10-year involvement in Dabhol, an Indian powerplant project, also went badly wrong. In October 2001 Enron’s shares and credit rating plunged. The company was forced to agree to a merger with Dynegy, a rival firm. But Dynegy backed out in November because of concerns about Enron’s debt. (It also feared legal action over irregularities in Enron’s accounting.) Enron then filed for bankruptcy.Royal AholdRoyal Ahold of the Netherlands, the world’s third-biggest food retailer, overstated its profits for 2001-02 by as much as $500m. Ahold’s accounting irregularities mainly involved American subsidiaries that it had bought over a 10-year period. (Ahold had also bought businesses in other countries, from Argentina to Scandinavia.) But the company’s Amsterdam-based auditors, Deloitte & Touche, failed to pick the problems up in 2001, even though worries about Ahold’s accounts were widely expressed in the markets. Ahold’s board, instead of asking questions, extended the term of the chief executive for up to seven years. The Dutch market regulator admitted that it had no powers of discipline over faulty auditing.WorldComThe US telecoms company WorldCom, founded in 1983 by Bernie Ebbers, followed a strategy of buying up other firms including MCI. WorldCom’s high share price helped it to outbid 教师用书U6.indd 31 17-3-9 下午5:0432 Unit 6competitors attempting to buy MCI and to secure a $37 billion merger in 1998. Two years later Mr Ebbers tried to buy Sprint, another American rival, but was blocked by antitrust regulators on both sides of the Atlantic. With WorldCom’s share price falling, and an investigation by regulators imminent, Mr Ebbers resigned as chief executive in April 2002. Shortly after, the discovery of massive fraud in WorldCom’s accounts shook stockmarkets around the world and prompted the company to file for bankruptcy protection. Two of its most senior finance officers were charged with fraud. In May 2003 the company, renamed MCI, settled an investigation into its accounting for $1.51 billion. The company emerged from bankruptcy in 2003 but its troubles were not yet over: it faced legal action alleging that the company had unfairly exploited telecoms regulations against competitors.ParmalatIn December 2003 Parmalat, an Italian food and milk-products company panicked investors by almost defaulting on a small bond issue. Days later Parmalat’s bankers forced out Calisto Tanzi, the group’s chairman and chief executive, leaving Enrico Bondi, a hired troubleshooter, in charge. Mr Bondi quickly discovered a huge and long-running deception that became the subject of a full-scale legal investigation. Two main allegations have emerged: that the family-owned group falsified its accounts to conceal losses; and that up to €800m was embezzled, chiefly by Mr Tanzi. The Italian government passed an emergency law on December 23rd introducing American-style bankruptcy protection. Although this saved Parmalat, Italy’s image has been damaged.