Financial Accounting: An Integrated Statements Approach, 2nd Edition

Enron Corporation, headquartered in Houston, Texas, provides products and services for

natural gas, electricity, and communications to wholesale and retail customers. Enron’s opera-

tions are conducted through a variety of subsidiaries and affiliates that involve transporting gas

through pipelines, transmitting electricity, and managing energy commodities. The following

data were taken from Enron’s December 31, 2000, 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

At the end of 2000, the market price of Enron’s stock was approximately $83 per share. As of

April 17, 2005, Enron’s stock was selling for $0.03 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 in such a short

time.

United Parcel Serviceprovides parcel delivery services around the world. The following table

shows the various revenue sources for the comparative years ended December 31, 2004 and

2003:

2004 2003

Revenue (in millions):

U.S. domestic package:

Next Day Air $ 6,040 $ 5,580

Two-to-Three Day Air 3,161 2,982

Ground 17,409 16,460

Total U.S. domestic package $26,610 $25,022

International package:

Domestic $ 1,346 $ 1,134

Export 4,944 4,001

Cargo 472 426

Total international package $ 6,762 $ 5,561

Non-package:

UPS Supply Chain Solutions (consulting services) $ 2,346 $ 2,126

Other 864 776

Total non-package $ 3,210 $ 2,902

Total $36,582 $33,485

1. Provide a horizontal analysis of UPS revenues.


2. Why is the total percentage change not equal to the sum of the percentage changes for
   each of the major subcategories (U.S. domestic, international, and non-package)?


3. Interpret the horizontal analysis.

48 Chapter 1 The Role of Accounting in Business

Case 1-5

Financial analysis of Enron

Corporation

Case 1-6

Horizontal revenue analysis