2000, and for four years ended on that date, Enron Inc. reported the following Ar December 31, 2000 amounts in millions): (20 marks) $65,503 Balance Sheet (summarized) Total Assets Total Liabilities Total Shareholders' Equity $54,033 $11,470 Income Statement (excerpts) Net Income Revenues 2000 $979 $100,789 1999 $893 1998 $703 1997 $105 *Operating Income = $1,953 Interest Expense = $838 In 2001, Enron Corporation filed for Chapter 11 bankruptcy protection, shocking the business community: How could a company this large and this successful go bankrupt? Unknown to investors and lenders, Enron also controlled hundreds of partnerships that owed vast amounts of money. These special purpose entities (SPEs) did not appear on the Enron financial statements. Assume that the SPE's assets totaled $7,000 million and their liabilities stood at $6,900 million; assume a 10% interest rate on these liabilities. During the four year period up to December 31st, 2000, Enron's stock price shot up from $17.50 to $90.56. Enron used its escalating stock price to finance the purchase of the SPEs by guaranteeing lenders that Enron would give them Enron stock if the SPEs could not pay their loans In 2002, the SEC launched an investigation into Enron's accounting practices. It was alleged that Enron should have been including the SPEs in its financial statements all along. Enron then restated netincome for years up to 2000, wiping out nearly $600 million of total net income (and total assets) for this four year period. Assume that $300 million of this loss applied to 2000. Enron's stock price tumbled, and the guarantees to the SPE's lenders added millions to Enron's liabilities (assume the full amount of the SPE's debt). To make matters worse, the assets of the SPEs lost much of theirvalue; assume that their market value is only $500 million Requirements: 1. Compute the debt ratio that Enron reported at the end of 2000. Compute Enron's Return on Total Assets (ROA) for 2000. For this purpose use only total assets at the end of 2000, rather than the average of 1999 and 2000. 2. Compute Enron's leverage ratio. Now compute Enron's Return on Equity (ROE) by multiplying the ROA computed in part 1 by the leverage ratio. Can you see anything unusual in these ratios that might have caused you to question them? Why or why not? Add the asset and liabili rable. Recompute all compute Enron's Time od liability information about the SPEs to the reported amounts provided in the mpute all the ratios after including the SPEs in Enron's financial statements. Also, bron's Times Interest Earned ratio both ways for 2000. Assume that the changes to ron's financial position occurred during 2000. does it appear that Enron failed to include the SPEs in its financial statements? How do you w Enron after including the SPEs in the company's financial statements? Why does it appear