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Resources Unlimited Corporation Bankruptcy Analysis

Resources Unlimited Corporation Bankruptcy Analysis. By Christopher Meyer. Overview. History Baseline Profits Gas Accounts in 1990 Determination of Entry-Level Management Salaries Hedge Fund Female Accountant Salary Dispute Summary. History (1 of 2). Merger in 1985

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Resources Unlimited Corporation Bankruptcy Analysis

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  1. Resources Unlimited Corporation Bankruptcy Analysis By Christopher Meyer

  2. Overview History Baseline Profits Gas Accounts in 1990 Determination of Entry-Level Management Salaries Hedge Fund Female Accountant Salary Dispute Summary

  3. History (1 of 2) • Merger in 1985 • Deregulation of Natural Gas Industry • Purchase costs and sales prices swung wildly • New CEO vision to use derivatives and hedges to absorb risk of cost/price swings • Very questionable methods • Accounting writes letter with concerns about derivatives model • CEO ignores warnings

  4. History (2 of 2) • Unrealistic profits • Corporation furnished analyst in New York incomplete data • Could not estimate gas accounts for 1990 • Discrimination charges by female accountant on basis of salary • Handful of gas accounts moved to dummy hedge fund to stave off bankruptcy • Bankrupt in 1994

  5. Baseline Profits (1 of 2) Cumulative 1987: $1,087 million Cumulative 1988: $803 million Total: $1,890 million Mean: $263.25 million Standard Dev. of Mean: $115.43 million Std. Dev. calculated because accounting unsure that numbers reported in media were accurate

  6. Baseline Profits (2 of 2)

  7. Gas Accounts in 1990 • 1988: 32 Nat. Gas Accts, 64 Oil Accts • 1990: 43 Nat. Gas Accts, 86 Oil Accts • Ratio

  8. Determination of Entry-Level Management Salaries • On surface: Regular step rates • Gender discrimination suite in Accounting department • Female accountant making $32,000 while male accountants doing same work made $50,000, $55,000, and $52,000 • Gender discrimination most likely pervaded throughout organization

  9. Hedge Fund • 500 Gas Accounts • Maintain cash flow for 30 days • 6 days before CEO made decision • 400 Gas Accounts transferred to maintain cash flow for 26 days • Ratio • Ultimately failed

  10. Female Accountant Salary Dispute (1 of 2) Male accountant salaries: $50,000; $55,000; $52,000 Mean: $52,333.33 Standard deviation: $2,516.61 Two standard deviations from the mean salary of top three other employees: $5,033.22 Appropriate raise: $16,000 New salary: $48,000

  11. Female Accountant Salary Dispute (2 of 2)

  12. Summary History Baseline Profits Gas Accounts in 1990 Determination of Entry-Level Management Salaries Hedge Fund Female Accountant Salary Dispute

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