WorldCom Case Flashcards
Why was WorldCom struggling in 2000?
The dot-com bubble burst and there was less demand for broadband
How did WorldCom stay afloat when they could no longer sustain their revenue stream?
They had reserves
Why did the SEC investigate WorldCom?
They were under pressure from the Government because of Enron
What was WorldCom’s strategy dependent on?
Mergers
Who was the CFO of WorldCom?
Scott Sullivan
What form of earnings management was WorldCom partaking in?
Capitalizing their ordinary expenses
Explain how WorldCom was changing their ordinary expenses to capital expenses
They were spreading their ordinary expenses across property accounts
How did changing their ordinary expenses to capital expenses benefit WorldCom?
It made their expenses look smaller over the span of years, which allowed them to pay the expenses over time and produce favorable financial statements for investors
List 5 primary people involved in the WorldCom case?
- Scott Sullivan
- David Myers
- Betty Vinson
- Buford Yates
- Troy Normand
What was the total amount that WorldCom overstated in cash flows?
$7.2 Billion
What was the ethical dilemma in the WorldCom case?
Should WorldCom be capitalizing their ordinary expenses in order to boost earnings?
