1. The Demise of Resources Unlimited Corporation
Mary K Molinaro Spada
Bellevue University, MSM630
The Demise of Resources Unlimited Corporation

2. History Natural gas industry regulated by the federal government
Companies purchased gas at federally approved costs from producers
Companies sold gas at federally approved prices to users
Demand was steady
Margins were set

3. Why the demise? Summary of Actions for: Baseline Profits for 1986-1988
The number of gas accounts in 1990
The number of gas accounts transferred to a hedge fund
The appropriate raise for the female accountant

4. Profits from 1986-1988 Profits in 1987 were $1.087 billion
Mean was $ million
Standard Deviation was $71.68 million
Variance $ billion
Profits in 1988 were $803 million
Mean was $ million
Standard Deviation was $125.13
Variance was $15,658.19

5. Total Profits for the Two Years 1986-1988
Profits for the two year period were 1.89 billion
The mean profit was $ million
The variance was $13,323.64
The standard deviation was $115.43

6. Resource Unlimited’s Quarterly Profits for 1987 & 1988 in Millions

7. Variance in Range
To look at a company financially, you want to compare the financials during a similar period year over year. Here we can see the comparison by quarter year over year.
The industry was deregulated so this is exactly what you would expect to see. You would expect a higher volatility (shown here) and and clearly the hedges are not working. If the hedges were working, you would expect a much tighter variance or more predictable cash flow.

8. Accounts 1988 and 1990
In 1988 the corporation had 32 gas and 64 oil accounts. This is a ration of 1 gas account to every 2 oil accounts. We are told that direct variance between the two was based on staffing requirements.
If in 1990, the corporation had 86 oil accounts, it should have known it had 43 gas accounts in that period. Either the staff is incompetent or somebody is hiding something.

9. Gas Accounts Transferred to a hedge fund
500 gas accounts would have produced cash flow for 30 days
After 6 days, 400 accounts were transferred to the dummy hedge fund.
Assuming that all accounts were equal in value, then 80% should have been transferred. The CEO is trying to get the accounts off the books. This is illegal and management is clearly doing something unethical.
400 accounts went into the hedge fund and that left only 100 accounts for cash flow. This was too little and too late.
It is not clear why the CEO would take accounts that were providing cash flow and put them in a hedge fund. This is a mystery. Perhaps is he stealing them?

10. Equal Pay for Female Accountant
Male Accountant Salaries were $50,000, $55,000, & $52,000
Female Accountant Salary was $32,000
Male Salary Mean=$52,333
Standard Deviation =$2,055
At two standard deviations, the female salary (rounded to the nearest $1000) should have been $48,000 . A raise of $16,000 was in order at the very minimum.
Assuming these are the three highest paid employees. Also, the female accountant is doing the same work as the males, so at a minimum, she must be paid $48,000 according to the rule.

11. Final Comments
Management style was aggressive , greedy, and short term focused because the CEO is excited about making profits because of the deregulation. He is clearly overly ambitious.
The accounting practices must include some type of checks and balances in the company such as an independent audit committee formed who can then select an external auditing firm.
Regarding profit structure, the CEO’s interests should be aligned with the shareholders’ interests for the long term. Also, CEO compensation should be tied to performance.
Communication needs to be shared with an independent board of directors so that messaging does not get lost or even deliberately hidden.