Financial analysis The now defunct Enron Corporation, once headquartered in Houston, Texas, provided products and services for natural gas, electricity, and communications to wholesale and retail customers. Enron’s operations were conducted through a variety of subsidiaries and affiliates that involved transporting gas through pipelines, transmitting electricity, and managing energy commodities. The following data were taken from Enron’s 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 The market price of Enron’s stock was approximately $83 per share when the prior financial statement data were taken. Before it went bankrupt, Enron’s stock sold for

$0.22 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.