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Abstract Son your ego is writing checks your body cant cash Paramount 1986 The famous words of Admiral TJ Cassidy in the high-flying action thriller Top Gun Paramount 1986 describe what occurred with Enron Enron was a giant corporation some say the largest energy company in the world who depended on outside credit sources to finance its daily operations In turn its credit-worthiness depended on its performance as reflected in the Enrons share prices When the price of Enrons shares collapsed so did its credit rating Consequently cash credit to the company became either prohibitively expensive or outright unavailable Without ready infusions of cash Enron became unable to meet its earlier credit obligations This depressed Enrons stock even deeper which in turn let to the further decline in already low share prices Being unable to pay its creditors with no forthcoming offers of merger from its competitors and with no foreseeable rescue attempt by the government Enron was forced into bankruptcy In the purely abstract form merely for illustrative purposes we can compare Enrons debacle with an imaginary individual whose life or at least lifestyle depended much on borrowing - lets say it became dependant on loans from credit card companies Without sufficient income to repay interest on these loans this hypothetical individual is forced to apply for new credit cards with which he is paying off his creditors At some point when the individuals credit rating worsens and he or she is no longer able to get more financing from the credit card issuers the finale becomes inevitable and usually it is the bankruptcy We can also compare Enrons disaster to a pyramid scheme In the classic pyramid scheme fraudsters here Enrons executives accounting firms corporate lawyers and their clique in the government have to keep their victims happy in the case of Enron the victims were investors shareholders suppliers and the general public by paying off unrealistic rates of return on victims investments
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