Week 1 Fin 486

Business Ethics

Your Name………..

Finance / 486

Business ethics are an important aspect of operating any organization, an organization has to have a set of standards which it applies to its dealings within the organization and with people and organizations that it does business with. Within the course of this paper we will discuss two organizations: Enron, and WorldCom and talk about unethical things that they were engaged in that led to their demise. Let’s first take a look at Enron the former Energy Company.

Enron

Enron’s trouble began with a variety of things like how they recognized revenue; Enron started a trend not only for its company but for other energy companies as well of reporting the whole value of a trade or service as revenue when they were only supposed to report a specific portion. This action led to it financials looking like they were higher than they really were, and therefore making its financial position look favorable to investors. The use of special purpose entities is also something that led to this organizations demise, with the use of these special purpose entities or sub companies Enron was able to manage debt and fund a specific asset. These special purpose entities were funded with debt and through independent equity investors, in most cases these entities helped overstate earning and understate liabilities which hurt investors and the organization.

WorldCom

WorldComwas a telecommunications company that service long distance calls and data service provider, what got this organization in trouble is the fact that the organization took expenses and used them as a capital expenditure, these expenses were fees associated with third party networking services and facilities. (K.Wharton 2002)

Business Ethics in Financial Planning

Business ethics in financial planning is very important especially since the collapses of companies like the two that we have just discussed in this paper. Some of the things that have to be accounted for...