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How did increased competition affect Enronâs energy-trading business?
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Enron scandal
The Enron logo outside the company's headquarters, Houston.
As the economic boom of the 1990s concluded, Enron faced increased competition in its energy-trading business, which caused the companyâs profits to shrink rapidly.1
In response to this mounting pressure from shareholders to maintain high performance, company executives began utilizing dubious accounting practices to conceal the firm's financial struggles. These methods included "mark-to-market accounting," which allowed the company to record unrealized future gains as current income to create the illusion of profitability, and the use of special purpose entities to hide troubled assets and losses off the company's books.1