Resources Unlimited Corporation

Amanda Barfuss

Assignment 11.1

MSM 630

Resources Unlimited History

• Formed in 1985 through the merger of two natural gas pipelines

• Largest gas distribution network in the United States

• 38,000 miles of pipeline stretching from the southwest to the northeast

Baseline Profits 1986-1988Quarterly Earnings

1986-Qtr. 1 1986-Qtr. 2 1986-Qtr. 3 1986-Qtr. 4 1987-Qtr. 1 1987-Qtr. 2 1987-Qtr. 3 1987-Qtr. 40

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000 Profits 1986-1988

Profits

• Unstable sales price

• Daily changes in supply and demand

Analysis of Gas and Oil Accounts

• 1988-Actual

• 64 Oil Accounts

• 32 Gas Accounts

• 1990-Projected Accounts

• 86 Oil Accounts

• 43 Gas Accounts

• Unable to verify the projected number of gas accounts in 1990

• Direct variance was known

Senior Management Style

• Slow to respond to issues

•Non-responsive

•Unclear lines of communication

• Lack of knowledge of the industry

•Questionable accounting practices

• 100 of the 500 gas accounts transferred to the hedge fund in attempt to buy time

Cost and Price Swing Solution

•Derivatives

•Hedge Funds

• Risky investments

• Accountants viewed this solution as unrealistic and attempted to persuade senior leadership to explore other options

Probable Discrimination SuiteAverage salary of a male employee in the Accounting

Department

= $52,000

Average salary of a female employee in the Accounting Department

= $32,000

Two standard deviations from the mean

• 18K raise in annual salary of female employee needed to avoid discrimination charges

Financial Analysis

• Lack of business plan

•Unpredictable cash flow

•Gas prices no longer regulated by Federal Government

•High natural gas extraction costs

•Unstable natural gas sales price

Factors that led to bankruptcy

• Lack of effective leadership

•Questionable to unethical accounting practices

• Lack of strategic planning

•HR Issues

• Salary Inequity

• Probably discrimination suite