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Case Study: The Demise of Resources Unlimited

This case study examines the factors that led to the downfall of Resources Unlimited, including baseline profits, gas accounts in 1990, salary discrimination, hedge funds, senior management, accounting practices, profit structure, and lines of communication.

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Case Study: The Demise of Resources Unlimited

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  1. Case Study: The Demise of Resources Unlimited Jessica Phung MSM 630-T302 Bellevue University

  2. Topics for Discussion • Baseline profits for 1986-1988 • Gas Accounts in 1990 • Salary Discrimination • Hedge Funds • Senior Management • Accounting Practices • Profit Structure • Lines of Communication

  3. Baseline Profits • What was the corporation’s baseline profits for 1986-1988?

  4. Baseline Profits • Cumulative Total: $1,890 million • Mean: $236.25 million • StandardDeviation:$115.43 million

  5. Gas Accounts in 1990 • According to Resources Unlimited, in 1988 there were: • 32 Gas Accounts • 64 Oil Accounts • Internal analysis projected 86 oil accounts for 1990

  6. Gas Accounts in 1990 • What was their number of gas accounts in 1990?

  7. Determination for Entry-Level Management Salaries • Gender discrimination in Accounting dept. • Previous salaries of employees performing the same job title: • (3) males • $50,000; $55,000; $52,000 • (1) female • $32,000 • To avoid lawsuit, the appropriate raise for the female accountant would be $20,000.

  8. Hedge Funds • 500 gas accounts to sustain for 30-days • CEO transfers gas accounts to a dummy-fund to lessen cash demands • 16.6 percent or 100 gas accounts were transferred to the Hedge Fund

  9. Corporate Senior Management • New CEO’s vision to take advantage of daily changes in supply/demand was too risky. • No technically trained personnel to monitor hedge funds. • Accounts sent a memo, no action was taken. • CEO transfers funds in an attempt to avoid bankruptcy, insufficient planning.

  10. Accounting Practices • CEO’s decision to use complex financial instruments without technical advisors. • Accountants suspected skewed data. • Incomplete data sent to New York analysts. • Inability to provide accurate data on gas accounts when requested.

  11. Profit Structure • Utilized derivatives and hedge funds, complex financial instruments without technical personnel. • Inaccurate forecasting, IE. 500 accounts to sustain a company workflow for 30-days • Current structure produced insufficient data and flawed reports

  12. Lines of Communication • CEO ignored memo from accountants. • Incomplete data sent to Wall Street analysts • CEO transfers a number of gas accounts to a dummy hedge fund but did not communicate with accountants or strategic planning division

  13. In Summary • Average baseline profits for 1986-1988 was $236 million • Gas Accounts in 1990 was 43. • To settle the salary discrimination, a raise of $20,000. • 100 gas accounts moved to Hedge Fund. • CEO did not use technical advisors for derivatives and hedge funds • Accounting wary of skewed data given to analysts • Profit structure produced incorrect forecasts. • Lack of communication in the organization, CEOs to the bottom-line.

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