Enron Financial Analysis

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Enron is a company that specializes in energy and power industry. They provide gas, oil, and electrical services worldwide. These comprise wholesale services, retail energy services, broadband services, and transportation services. They have reported revenues of $100.789billion, $40.112billion, and $31.260 billion for the years 2000, 1999, and 1998 respectively. This is a growth of 151.3% from year 1999 to 2000 and 28.3% from 1998 to 1999. This is unparalleled in the relatively stable energy business. Let’s take a look at the financial statements and see the breakdown. Revenues and income for 2000 (in millions)

Transportation and DistributionWholesaleRetailBroadbandCostsTotal Revenue$2,955$94,906$4,615$408$2,095$100,789
% of total2.9%94.2%4.6%.4%
Operating income$565$1,668$58($64)($274)$1,953
% of total28.9%85.4%3.0%
Operating margin19.1%1.8%1.3%(15.7%)1.9%

The above table shows that the division making the most revenue is only operating at 1.8% profit margin. In fact, transportation and distribution is the most significant division adding to profit margin at 19.1%. In comparison to previous years the wholesale revenues were $36,287 and $27,725 for 1999 and 1998 respectively. Operating income was$ 551(27.12%) and $562 (30.4%) for 1999 and 1998. This is showing a declining bottom line in regards to wholesale services. Gross profit percentages for the company as a whole have been declining also. They were 6.2 % (Rev $100.789 billion and gross profit of $6.727 billion), 13.3% (Rev $40.112 billion and gross profit of $5.351 billion), and 15.6% (Rev $31.260 billion and gross profit of $4.879 billion) for the years 2000, 1999, and 1998 respectively. Wholesale services basically involve asset ownership, contractual access to third-party assets and market-making activities. According to annual reports commodity sales and services made up the majority of...
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