WorldCom Case Flashcards

1
Q

Why was WorldCom struggling in 2000?

A

The dot-com bubble burst and there was less demand for broadband

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

How did WorldCom stay afloat when they could no longer sustain their revenue stream?

A

They had reserves

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Why did the SEC investigate WorldCom?

A

They were under pressure from the Government because of Enron

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What was WorldCom’s strategy dependent on?

A

Mergers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Who was the CFO of WorldCom?

A

Scott Sullivan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What form of earnings management was WorldCom partaking in?

A

Capitalizing their ordinary expenses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Explain how WorldCom was changing their ordinary expenses to capital expenses

A

They were spreading their ordinary expenses across property accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How did changing their ordinary expenses to capital expenses benefit WorldCom?

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

List 5 primary people involved in the WorldCom case?

A
  1. Scott Sullivan
  2. David Myers
  3. Betty Vinson
  4. Buford Yates
  5. Troy Normand
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What was the total amount that WorldCom overstated in cash flows?

A

$7.2 Billion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What was the ethical dilemma in the WorldCom case?

A

Should WorldCom be capitalizing their ordinary expenses in order to boost earnings?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly