In order to ensure an investment-grade credit rating, Enron began to emphasize the following three actions:
A)Reducing accruals, increasing cash flow, and lowering debt
B)Smoothing accruals, increasing cash flow, and lowering debt
C)Increasing cash flow, lowering debt, and smoothing earnings
D)Increasing cash flow, lowering earnings and decreasing option expense
E)Increasing cash flow, lowering debt, and decreasing option expense

Question

Quizplus · Accepted Answer

Enron's emphasis on increasing cash flow and lowering debt are both common measures for achieving an investment-grade credit rating. However, smoothing earnings (or accruals) rather than reducing them outright was also a key strategy used by Enron to maintain the appearance of stability and consistency in its financial reports, thus improving its creditworthiness in the eyes of lenders and investors.

In Order to Ensure an Investment-Grade Credit Rating, Enron Began