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Case Study: Resources Unlimited Corporation

Case Study: Resources Unlimited Corporation. Kyra C. Caron Bellevue University MSM 630 Instructor: Dr. Henry Door. Resources Unlimited Corporation Timeline (History). Formed in1985 through the merger of two natural pipeline companies.

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Case Study: Resources Unlimited Corporation

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  1. Case Study:Resources Unlimited Corporation Kyra C. Caron Bellevue University MSM 630 Instructor: Dr. Henry Door

  2. Resources Unlimited CorporationTimeline (History) • Formed in1985 through the merger of two natural pipeline companies. • 38,000 miles of pipeline from southwestern and mountain states to northeastern and Midwestern region. • Soon after merger, the natural gas industry was deregulated. • New CEO vision was to use derivatives and hedges to absorb the rise of the cost and price swings in the industry. • Accounting provided a memo to CEO addressing potential problems concerning the derivative model; which was ignored. • Incomplete date was furnished to analyst in New York. • Rumors of a joint plan hatched by the accounting department and strategic planning division to dwindle natural gas accounts. • Transferred, on paper, a number of gas accounts to a dummy hedge fund. • Entered bankruptcy June of 1994.

  3. Baseline Profits • Quarterly Profits (Year: 86-88): • $342, $267, $321, $157, $33, $349, $132, $289 • Average Profit (Mean): • $236.25 • Variance (s²): • 13323.64 • Standard Deviation (s): • $115.4281 • Baseline + (quartile 3): • $326.25 • Baseline – (quartile 1): • $150.75

  4. Gas Accounts in 1988 &Projected for 1990 • 1988 • Gas: 32 • Oil: 64 • Projected 1990 • Gas: 54 • Oil: 86 • Gas and Oil are parallel due to their direct variance.

  5. How Many Gas Accounts Transferred to Hedge Fund? • 500 Gas Accounts to maintain corporate cash flow for 30 days. After 6 days CEO transferred (on paper) gas accounts to a dummy hedge fund to ward off bankruptcy.

  6. Salaries for Entry Level Management • 3 Male Salaries: • $50,000, $55,000, $52,000 • Average Male Salary: • $52333.33333 • Standard Deviation of Male Salary: • $2,516.61 • Average Male Salary less Deviation: • $49,816.72 • 1 Female Salary: • $32,000 • Raise Determination • Average Male Salary less Deviation – Female Salary: • Raise of $17,816.72 • Female Salary after Raise: • $49,816.72

  7. Additional Company Information Management Style: • Created a new vision; however, vision was too complex. • Should have reevaluated. • Ignored Accounting Department addressing potential problems. • Never ignore information regarding the company; everything is worth your attention. • Provided incomplete data to Wall Street. • Make sure all information is completed and available upon request. Show transparency. • Was sued by a Female employee based on wage discrimination. • Understand the laws, train supervisors and manager regarding wage practices, and audit pay practices. • Reported (on paper) false information regarding gas accounts to avoid bankruptcy. • Never report false information.

  8. Additional Company Information Accounting Practices: • Tried to inform CEO regarding the derivative model and how it was constructed. • Should have pushed harder regarding such information instead of just a memo. • Did not conduct proper projections on both gas and oil accounts; only conducted predications on oil accounts. • Gas accounts should have been completed when oil accounts were; do not leave things unfinished. • Worked well with Strategic Planning Division. • Should work well with all areas of the corporation.

  9. Additional Company Information Lines of Communication: • Lack of communication between CEO and Accounting Department. • Lack of communication and transparency of data provided to Wall Street and creditors. • Great communication between Accounting Department and Strategic Planning Division; however, this was rumored. No direct communication to rest of company. Profit Structure: • Natural gas industry was regulated by the federal government and purchased gas at federally approved cost from produces and then sold at federally approved prices to the user. This was deregulated after the merger of both companies causing uncertainty and unsteadiness.

  10. Topics Slide One: Introduction Slide Two: History Slide Three: Baseline Profit Slide Four: Gas and Oil Accounts Slide Five: Hedge Fund Slide Six: Male/Female Salary Slide Seven: Management Style Slide Eight: Accounting Practices Slide Nine: Lines of communications Slide Nine: Profit Structure

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