QUESTIONS 1
Answer 1:
The revenue development got slow and prices of stock starts to fall in 1990. The expenses of
WorldCom as the percentage of the total revenue enhanced due to the fall in earning’s growth
rate. This also meant earnings of WorldCom could not meet expectations of Wall Street analyst.
These conditions pressures managers and executives of WorldCom to fraudulently report. For
increasing the revenue, Ebbers forced the workers to enhance revenue. Ebbers put pressure on
them to build revenue and get capability for handling development even though long-run cost
exceeds short-run profits. The revenue development was essential for increasing market value of
company. Because of the demand by Ebbers, the manager as well as executives required to state
rise in revenue that they started cooking the book. WorldCom took entry in long-term fix rate
lease of networking capacity for meeting anticipated rise in demand of consumer. WorldCom can
ignore lease payment only by paying heavy termination fee. In a case when customers failed to
meet expectation, WorldCom will make payment for line capacity that it was not utilising. The
telecommunication sector started to fall apart as outcome of higher competition together with
lower demand at the onset of the financial downturn. As new entrants began to enter the market,
it resulted into price to reduce more and WorldCom forced for matching. For this
reason, WorldCom faced high pressure to enhance revenue. In addition, WorldCom made
struggle to keep similar E/R ratio, closely reviewed by analyst along with industry observer. It is
facing pricing pressure related to pricing and higher committed line cost. Moreover, the investors
cannot be attractive to the consumers (Annunziata, 2018).
Ebbers (chief executive officer) handled senior manager by explaining that they would lose the
whole thing. Ebbers addressed top-level management that how they will lose everything in case
of non-improvement of the enactment. It has motivated manager to do whatever it consider for
boosting revenues and stay at workplace. Therefore, Sullivan took decision to entries to get
targeted enactment. Sullian fined that the only manner that he as well as two team members
utilised major accounting strategies that accrual release as well as capitalization of line-cost for
manipulating figures for showing that entity is in best position. In conclusion, the pressure or
factors like fulfilling expectations of marketplace, downturn in economy and extreme
competition in sector has lead manager and executive to fraudulently report.

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