1B. Show how you can calculate sustainable operating cash flow for Enron Corporation for the year ended December 31, 2000. Explain any important assumptions you made in answering the question.

1C. Calculate the Commonly Used Ratios for Enron Corporation for the years ended December 31, 2000 and December 31, 1999. Note: For profitability ratios, first adjust for earnings quality issues. Use sustainable cash flow from operations (as computed in 1b.) for cash flow from operations is all applicable ratios

2000 1999 1998 Enron Corp. and Subsidiaries Balance Sheet December 31, Assets Current Assets Cash and cash equivalents Trade receivables, net Other receivables Assets from price risk management activities Inventories Deposits Other receivables Total Current Assets 1,374 10,396 1,874 12,018 953 2,433 1,333 30,381 288 3,030 518 2,205 598 81 535 7,255 111 2,060 833 1,904 514 0 511 5,933 Investments and Other Assets Investments in and advances to unconsolidated equity affiliates Assets from price risk management activities Goodwill Other Total investments and other assets 5,294 8,988 3,638 5,459 23,379 5,036 2,929 2,799 4,681 15,445 4,433 1,941 1,949 4,437 12,760 Property, Plant and Equipment at cost Natural gas transmission Electric generation and distribution Fiber-optic network and equipment Construction in progress Other 6,916 4,766 839 682 2,256 15,459 3,716 11,743 65,503 6,948 3,552 379 1,120 1,913 13,912 3,231 10,681 33,381 6,936 2,061 989 4,814 992 15,792 5,135 10,657 29,350 less accumulated depreciation Property, plant and Equipment, net Total Assets 9,777 Liabilities and Shareholders' Equity Current Liabilities Accounts payable Liabilities from price risk management activities Short-term debt Customers' deposits Other Total Current Liabilities Long-term Debt Deferred Credits and Other Liabilities Deferred income Taxes Liabilities from price risk management activities Other Total Deferred Credits and Other Liabilities Minority Interest in Consolidated Subsidaries Company-Obligated Preferred Securities of Subsidiaries 10,495 1,679 4,277 2,178 28,406 8,550 2,154 1,836 1,001 44 1,724 6,759 7,151 2,380 2,511 0 0 1,216 6,107 7,357 1,644 9,423 2,692 13,759 2,414 904 1,894 2,990 1,587 6,471 2,430 1,000 2,357 1,421 1,916 5,694 2,143 1,001 Shareholder's Equity Second preferred stock Mandatorily Convertible Junior Preferred Stock Common Stock Retained Earnings Accumulated Other Comprehensive Income Common Stock Held in the Treasury Restricted Stock and Other Total Shareholder's Equity Total Liabilities and Shareholder's Equity 124 1,000 8,348 3,226 -1,048 -32 -148 11,470 65,503 130 1,000 6,637 2,698 -741 -49 -105 9,570 33,381 132 0 5,117 2,226 - 162 -195 -70 7,048 29,350 2000 1999 1998 Enron Corp. and Subsidiaries Income Statement Year ended December 31, Revenues Natural gas and other products Electricity Metals Other Total Revenues 50,500 33,823 9,234 7,232 100,789 19,536 15,238 0 5,338 40,112 13,276 13,939 0 4,045 31,260 Cost and Expenses Cost of gas, electricy metals and other products Operating expenses Depreciation, depletion and amortization Taxes, other than income taxes Impairment of long-lived assets Total costs and expenses Operating income 94,517 3,184 855 280 34,761 3,045 870 193 441 39,310 802 26,381 2,473 827 201 0 29,882 1,378 98,836 1,953 97 56 Other income and deductions Equity in earnings of unconsolidated equity affiliates Gains on sales of non-merchant assets Gains on the issuance of stock by TNPC, Inc. Interest income Other income, net Total other income and deductions Income Before Interest, Minority Interests and Income Taxes 87 146 121 212 -37 529 2,482 309 541 0 162 181 1,193 1,995 88 -37 204 1,582 Other Interest and related charges, net Dividends on company-obligated preferred securities of subsidia Minority interests in (earnings) losses of unconsolidated subsida Income tax expense Other charges Net income before cumulative effect of accounting changes Cumulative effect of accounting change, net of tax Net income 838 77 154 434 1,503 979 656 76 135 104 971 1,024 -131 550 77 77 175 879 703 0 979 893 703 Enron Corp. and Subsidiaries Statement of Cash Flows Year ended December 31, 2000 1999 1998 Cash Flow From Operating Activities Reconciliation of net income to net cash provided by operating activities Net income Cumulative effect of accounting chagnes Depreciation, depletion and amortization Impairment of long-lived assets (including equity investments) Deferred income taxes Gains on sales of non-merchant assets Changes in the components of working capital Net assets from price risk managemetn activities Merchant assets and investments Realized gains on sales Proceeds from sales Additions and unrealized gains Other operating activities 979 0 855 326 207 -146 1,769 -763 893 131 870 441 21 -541 - 1,000 -395 703 0 827 0 87 -82 -233 350 -104 1,838 -1,295 1,113 4,779 -756 2,217 -827 174 -628 1,434 -721 -97 1,640 1,228 -2,381 -933 494 -2,363 -722 294 Cash Flows from Investing Activities Capital expenditures Equity investments Proceeds from sales of non-merchant assets Acquisition of subsidiary stock Business acquisitions, net of cash acquired Other investing activities Net Cash Used in Investing Activities -485 -1,905 -1,659 239 -180 -104 -356 -3,965 -777 -182 -4,264 -311 -405 -3,507 3,994 -2,337 -1,595 1,776 -1,837 1,903 -870 1,565 -158 Cash Flows from Financing Activities Issuance of long-term debt Repayment of long-term debt Net incrase (decrease) in short-term borrowing Net issuance (redemption of company obligated preferred securities of subsidiaries Issuance of common stock Issuance of subsidiary equity Dividends paid Net disposition of treasury stock Other financing activities Net Cash Provided by Financing Activities Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of the Year Cash and Cash Equivalents, End of the Year -96 307 500 -523 327 0 852 568 -467 139 -140 2,456 177 111 8 867 828 -414 13 89 2,266 -59 170 571 1,086 288 1,374 288 111 Changes in Components of Working Capital Receivables Inventories Payables Other -8,203 1,336 7,167 1,469 1,769 -662 -133 -246 41 -1,055 -372 433 761 -1,000 -233 2000 1999 1998 Enron Corp. and Subsidiaries Balance Sheet December 31, Assets Current Assets Cash and cash equivalents Trade receivables, net Other receivables Assets from price risk management activities Inventories Deposits Other receivables Total Current Assets 1,374 10,396 1,874 12,018 953 2,433 1,333 30,381 288 3,030 518 2,205 598 81 535 7,255 111 2,060 833 1,904 514 0 511 5,933 Investments and Other Assets Investments in and advances to unconsolidated equity affiliates Assets from price risk management activities Goodwill Other Total investments and other assets 5,294 8,988 3,638 5,459 23,379 5,036 2,929 2,799 4,681 15,445 4,433 1,941 1,949 4,437 12,760 Property, Plant and Equipment at cost Natural gas transmission Electric generation and distribution Fiber-optic network and equipment Construction in progress Other 6,916 4,766 839 682 2,256 15,459 3,716 11,743 65,503 6,948 3,552 379 1,120 1,913 13,912 3,231 10,681 33,381 6,936 2,061 989 4,814 992 15,792 5,135 10,657 29,350 less accumulated depreciation Property, plant and Equipment, net Total Assets 9,777 Liabilities and Shareholders' Equity Current Liabilities Accounts payable Liabilities from price risk management activities Short-term debt Customers' deposits Other Total Current Liabilities Long-term Debt Deferred Credits and Other Liabilities Deferred income Taxes Liabilities from price risk management activities Other Total Deferred Credits and Other Liabilities Minority Interest in Consolidated Subsidaries Company-Obligated Preferred Securities of Subsidiaries 10,495 1,679 4,277 2,178 28,406 8,550 2,154 1,836 1,001 44 1,724 6,759 7,151 2,380 2,511 0 0 1,216 6,107 7,357 1,644 9,423 2,692 13,759 2,414 904 1,894 2,990 1,587 6,471 2,430 1,000 2,357 1,421 1,916 5,694 2,143 1,001 Shareholder's Equity Second preferred stock Mandatorily Convertible Junior Preferred Stock Common Stock Retained Earnings Accumulated Other Comprehensive Income Common Stock Held in the Treasury Restricted Stock and Other Total Shareholder's Equity Total Liabilities and Shareholder's Equity 124 1,000 8,348 3,226 -1,048 -32 -148 11,470 65,503 130 1,000 6,637 2,698 -741 -49 -105 9,570 33,381 132 0 5,117 2,226 - 162 -195 -70 7,048 29,350 2000 1999 1998 Enron Corp. and Subsidiaries Income Statement Year ended December 31, Revenues Natural gas and other products Electricity Metals Other Total Revenues 50,500 33,823 9,234 7,232 100,789 19,536 15,238 0 5,338 40,112 13,276 13,939 0 4,045 31,260 Cost and Expenses Cost of gas, electricy metals and other products Operating expenses Depreciation, depletion and amortization Taxes, other than income taxes Impairment of long-lived assets Total costs and expenses Operating income 94,517 3,184 855 280 34,761 3,045 870 193 441 39,310 802 26,381 2,473 827 201 0 29,882 1,378 98,836 1,953 97 56 Other income and deductions Equity in earnings of unconsolidated equity affiliates Gains on sales of non-merchant assets Gains on the issuance of stock by TNPC, Inc. Interest income Other income, net Total other income and deductions Income Before Interest, Minority Interests and Income Taxes 87 146 121 212 -37 529 2,482 309 541 0 162 181 1,193 1,995 88 -37 204 1,582 Other Interest and related charges, net Dividends on company-obligated preferred securities of subsidia Minority interests in (earnings) losses of unconsolidated subsida Income tax expense Other charges Net income before cumulative effect of accounting changes Cumulative effect of accounting change, net of tax Net income 838 77 154 434 1,503 979 656 76 135 104 971 1,024 -131 550 77 77 175 879 703 0 979 893 703 Enron Corp. and Subsidiaries Statement of Cash Flows Year ended December 31, 2000 1999 1998 Cash Flow From Operating Activities Reconciliation of net income to net cash provided by operating activities Net income Cumulative effect of accounting chagnes Depreciation, depletion and amortization Impairment of long-lived assets (including equity investments) Deferred income taxes Gains on sales of non-merchant assets Changes in the components of working capital Net assets from price risk managemetn activities Merchant assets and investments Realized gains on sales Proceeds from sales Additions and unrealized gains Other operating activities 979 0 855 326 207 -146 1,769 -763 893 131 870 441 21 -541 - 1,000 -395 703 0 827 0 87 -82 -233 350 -104 1,838 -1,295 1,113 4,779 -756 2,217 -827 174 -628 1,434 -721 -97 1,640 1,228 -2,381 -933 494 -2,363 -722 294 Cash Flows from Investing Activities Capital expenditures Equity investments Proceeds from sales of non-merchant assets Acquisition of subsidiary stock Business acquisitions, net of cash acquired Other investing activities Net Cash Used in Investing Activities -485 -1,905 -1,659 239 -180 -104 -356 -3,965 -777 -182 -4,264 -311 -405 -3,507 3,994 -2,337 -1,595 1,776 -1,837 1,903 -870 1,565 -158 Cash Flows from Financing Activities Issuance of long-term debt Repayment of long-term debt Net incrase (decrease) in short-term borrowing Net issuance (redemption of company obligated preferred securities of subsidiaries Issuance of common stock Issuance of subsidiary equity Dividends paid Net disposition of treasury stock Other financing activities Net Cash Provided by Financing Activities Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of the Year Cash and Cash Equivalents, End of the Year -96 307 500 -523 327 0 852 568 -467 139 -140 2,456 177 111 8 867 828 -414 13 89 2,266 -59 170 571 1,086 288 1,374 288 111 Changes in Components of Working Capital Receivables Inventories Payables Other -8,203 1,336 7,167 1,469 1,769 -662 -133 -246 41 -1,055 -372 433 761 -1,000 -233