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Case Study: The Demise of Resources Unlimited

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

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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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