The Principles of Finance

Principles of Finance Student’s Name Institutional Affiliation  Principles of Finance The merger between the InterNorth and Houston Natural Gas initiated by Kenneth Lay in 1985 led to the formation of Enron Corporation. Lay became the chief executive officer (CEO) and helped the company to start selling electricity at affordable prices. On December 31, 2000, Enron Corporation was worth about $60 billion with shares selling at $90.75 (GAILLE PLLC, 2019). The collapse of the firm was attributed by accounting malpractices in the company, which was meant to boost the market share prices. Enron Corporation’s leadership violated ethical laws by enhancing the manipulation of the firm’s financial statements. One of the laws it compromised was the Securities Act (1933) that prohibits any company from deceit, fraud, and misrepresentation of its finances and sale of securities. Moreover, Enron Corporation violated the Securities Exchange Act (SEC, 1934), which requires firms to report accurate financial statements periodically (U.S. Securities and Exchange Commission, 2013). The SEC has the powers to punish any company involved in financial malpractices. Lay and Jeffrey Skilling were held responsible for fraudulent activities in Enron Corporation. Although the Federal Reserve Bank did not play a role in the collapse of Enron Corporation, some investment banking institutions contributed to the unethical practices of the company. In particular, the inflation of a firm’s re...