Chapter 1 - Ken Lay's Junk Bond Ride Up On the Natural Gas Express
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1.
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The main problem with junk-bond financing is that investment bankers, lacking regulatory oversight of their less well compensated counterparts at commercial banks, in the heat of competition could make one bad deal after another.
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2.
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As the money that could be made from junk bonds increased, so did the tendency to violate securities laws.
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3.
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Deregulation of energy markets created:
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  New markets
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New opportunities
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New temptations
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All of the above
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4.
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Ken Lay mastered political hobnobbing.
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5.
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Ken Lay's mastery of politics is what saved Enron.
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Chapter 2 - A Pattern of Less than Full Disclosure
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6.
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For accounting purposes, a hard asset like an oil well is kept on a company’s books:
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At fair market value at the beginning of the year
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At the price it paid to acquire it
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At the fair market value at the end of the year
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At the amount of profit expected to be generated by the asset
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7.
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In mark-to-market accounting, the value of each asset is reassessed on a regular basis and changes in value are reflected:
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In both the company's balance sheet and its income statement
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In the company's balance sheet only
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In the company's income statement only
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In the company's footnotes to the income statement only
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8.
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Large asset sales hindered Enron's earnings growth.
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9.
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“Closing prices” of stocks on the New York Stock Exchange depend on:
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The average stock price for the day
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The last trade of the day
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The first trade of the day
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The clearing price set by the Exchange's specialists
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10.
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Companies that hold assets that are easily valued are encouraged to use mark-to-market accounting.
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11.
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Mark-to-market accounting can be easily abused.
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Chapter 3 - The Skilling Case Study
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12.
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The immediate advantage that Enron gained from mark-to-market accounting was:
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That it is easy to compute
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That it requires less documentation than other methods of revenue recognition
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That it put a very positive spin on its earnings
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That it created more jobs
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13.
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Special Purpose Entities (SPEs) were a critical step in Enron’s evolution.
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14.
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The "gas bank" arranged long-term contracts for natural gas.
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15.
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Mark-to-model accounting differs from mark-to-market accounting?
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Chapter 4 - The Downside of Rank and Yank
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16.
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From his position of power, Enron CFO, Andrew Fastow, was able to:
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Funnel vast sums of money into his own pockets and into the pockets of those who assisted him
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Be promoted to CEO
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Work from home
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Make improvements to Enron's corporate culture
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17.
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Fastow was able to create an empire of SPEs of dubious legal status without anyone at Enron standing in his way.
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18.
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Enron was a place where executives could remake themselves for their next job after Enron.
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19.
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According to the authors, Enron has been described by many employees as:
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A great place to work
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Having a culture based on team building and mutual respect
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Having an absolute cutthroat culture that pitted one employee against another
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A very fair company
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20.
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According to Enron management kindness is a show of weakness.
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Chapter 5 - A Market a Day Keeps the Deby Away (But Only Temporarily)
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21.
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One thing that Enron knew even before it started the natural gas market was that its creation would make natural gas contracts more valuable by:
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Making them easier to read
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Making them more valuable
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Making them substantially more liquid
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Making them more expensive
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22.
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The most important option that a market can provide is liquidity.
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23.
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It was the proposed expansion of the JEDI program under Jeffrey Skilling in 1997 that led to the creation of the controversial SPE known as Chewco which would start Enron down the slippery slope of increasingly questionable SPEs.
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24.
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Enron used its power in the marketplace to buy natural gas from financially distressed producers at bargain prices.
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25.
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Enron's market creation stopped with electricity.
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Chapter 6 - Enron Goes Online
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26.
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What set Netscape’s IPO apart from the vast majority of IPOs that preceded it was that not only was Netscape unprofitable at the time of the IPO, but it also had no immediate prospect of profitability.
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27.
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Enron Online represented a fundamental shift in how Enron did business.
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28.
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The new economy approach to stock valuation is based on a company's earnings.
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29.
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EnronOnline represented a fundamental shift in how Enron did business?
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Chapter 7 - Broadband is a Costly Mistake
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30.
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Broadband communications became the darling of Wall Street because the technology was:
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Extremely cost effective
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The key to developing high-speed internet access.
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Cutting-edge
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Already in place
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31.
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The broadband market that Enron developed allowed companies to:
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Share information
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Surf the Internet
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Buy and sell stocks online
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Trade bandwidth, which is the use of some of the capacity of a fiber-optic cable for a specific period of time.
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32.
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California's retail electricity market was a fertile ground for the type of energy trading executed by Enron.
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33.
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The high prices and electricity shortage in California came back to haunt Enron.
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Chapter 8 - Enron Takes on Water
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34.
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California did not provide a natural habitat for Enron because its half-hearted efforts at deregulation were not the kind of free-market environment in which Enron’s market-making prowess could be fully exploited.
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35.
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Azurix and its investments in water assets around the world became a textbook case of:
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How Enron would do deals just for the sake of doing them, but without doing the homework necessary to ensure their success
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How to run a water utility company
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How to expand into international markets
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How Enron really cared about the supply of clean drinking water to under-developed nations
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36.
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Enron planned to buy up the world's water.
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37.
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The Azurix failure would prove too visible to hide.
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Chapter 9 - From Arrogance to Bankruptcy
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38.
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At the heart of Enron’s problems was Kenneth Lay’s misguided trust in the power of markets.
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39.
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In San Francisco, as Jeffrey Skilling was entering the Commonwealth Club of California to speak on the state’s energy crisis, a protestor threw a pie at him.
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40.
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Ken Lay had no trust in the power of markets.
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41.
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Much of Enron’s financing depended on its continuing ability to maintain an investment-grade credit rating.
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42.
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Jeffrey Skilling did not get along well with others.
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Chapter 10 - Of Talking Heads and Quiet Deals
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43.
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Andersen’s defense to an investigative subcommittee in 2001 was:
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That they plead the fifth amendment
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That Andersen had not shredded any documents
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That Enron had not told Andersen the truth about its finances and that what it knew had made it suspicious enough to notify Enron's audit committee
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That Enron was not to blame
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44.
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The Powers report was of questionable objectivity.
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45.
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The Powers Committee report released in February 2002 generally let board members, like Kenneth Lay, off lightly and reserved its wrath for Andy Fastow, Jeff Skilling, and Andersen’s audit work.
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46.
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Jeffrey Skilling is not an accountant.
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47.
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The Raptors were used to hide $1.1 billion in Enron losses.
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Chapter 11 - The Only Place to End the Enron Story
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48.
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Social capital can be viewed as the web of connections that link people together.
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49.
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The true lesson of Enron is that one who lives by the market can also die by the market.
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50.
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The Enron scandal has shown how powerful markets can be.
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