After studying this chapter, you should be able to:
Nortel Networks (CAN) filed for bankruptcy in early 2009. Nortel's demise represents one of the biggest financial failures in Canadian history. At one time, it accounted for one-third of all equity traded on the Toronto Stock Exchange; in 2000, its shares were as high as $124.50. In 2009, however, those shares were worth just 1.2 cents. What happened to Nortel? First, competition was intense, and some bad business decisions were made. As a result, the company was hit very hard by the technology share price decline in the early 2000s. Second, it became involved in accounting scandals for which three of its executives eventually faced criminal charges.
In one loan accounting scheme, Nortel managed its bad debt allowance to ensure that executives received additional ...