Question

Doing a financial analysis of Enron and I have no idea how to answer this question?

1) Identify other financial resources (i.e. other than assets, etc.) at Enron’s disposal and indicate the relevance of these resources to Enron’s liquidity as of December 31, 2000. Address any concerns about off balance sheet obligations that will need to be met during the upcoming year. Also address any guarantees that Enron may be contingently liable for.

Answer 1

In terms of finance control, financial resources are structured as follows:

• Business funds - cash, deposits with financial institutions and cash equivalents (securities, checks …)
• Corporate capital - the sum of all money invested in the organization’s total assets (equity capital + liability (foreign capital)
• Other financial resources - resources of funds creation and corporate capital (flow variable - the sum of “inflow” of money into the company for a certain period)

Relevance:

The financial resources that people have consist of the money they want to invest in order to start a business. If someone wants to start their own company, they need to make sure that the money that is available to spend is enough. This is how they will succeed in having a dynamic and productive business.

Off Balance Sheet Items:

Off-balance sheet (OBS) items is a term for assets or liabilities that do not appear on a company's balance sheet. Although not recorded on the balance sheet, they are still assets and liabilities of the company. Off-balance sheet items are typically those not owned by or are a direct obligation of the company. For example, when loans are securitized and sold off as investments, the secured debt is often kept off the bank's books. An operating lease is one of the most common off-balance items.

• Operating Lease
• Leaseback Agreements
• Accounts Receivables