TESLA INC 18 ANALYSING POSITION AND PERFORMANCE – WHERE TO NOW

This report provides a comprehensive financial analysis of Tesla Inc., examining its financial position and performance for the years 2016 and 2017. The analysis utilizes various financial ratios, including liquidity, leverage, and efficiency ratios, to assess the company's financial health. The report delves into key metrics such as the current ratio, quick ratio, working capital, debt ratio, debt-to-equity ratio, and equity ratio to evaluate Tesla's ability to manage its short-term and long-term obligations, as well as its overall solvency. The report also considers the company's business nature, focusing on electric vehicle manufacturing, energy storage, and solar panel production. The analysis aims to provide insights into Tesla's financial standing, identify potential risks, and offer recommendations regarding investment considerations. The report concludes with an overview of the company's financial position and performance, drawing conclusions from the calculated financial ratios and data analysis.

Contents
EXECUTIVE SUMMARY.................................................................................................................................2
INTRODUCTION...........................................................................................................................................2
NAME OF COMPANY AND NATURE OF BUSINESS.......................................................................................3
ANALYSING THE POSITION OF THE COMPANY............................................................................................3
ANALYZING THE PERFORMANCE OF THE COMPANY...................................................................................7
CONCLUSION AND RECOMMENDATION.....................................................................................................9
REFERENCES................................................................................................................................................9
APPENDIX..................................................................................................................................................10
EXECUTIVE SUMMARY
The financial statement plays the significant role in assessing the results of the company. The
title of the report is analyzing the financial position and financial performance from the last two
years and as of now where the Tesla stands. As the title suggests, there are three major aims of
the report. The first major aim of the report is to analyze the financial position of the company
using the data from the annual report of the company. The second aim is to analyze the financial
performance of the company using the data from annual report of the company. Along with this
primary data, the report has used the secondary data sources. The last aim is to use the financial
ratios to understand the financial position and the financial performance of the company. With
these considerations the report has been prepared and divided into different sections.
INTRODUCTION
Financial position and the financial performance of the company can be judged only through the
financial statements of the company. The financial statements are embedded in the annual report
of the company. These financial statements are prepared for the users of the financial statements
so that they can have the meaningful and effective decision. In this report, the data of the
company – Tesla Inc has been obtained and the analyses have been done accordingly. The
company is listed in United States Stock Exchange. At first the name of company and the nature
of business of the company along with the background of the company have been detailed. After

that through the annual report of the company the financial position of the company has been
analysed. For the purpose of the analyses, the annual report of the company for the year ending
31st of December 2017 and 31st of December 2016 has been considered. Two years have been
considered for the same company only because of the fact of having more clear and precise
comparison with earlier year as base for computation. Then the financial performance of the
company has been analysed as to whether the company is making profits or not and whether the
company is generating the higher earnings to their investors. There are three methods for
analyses – one is vertical, other one is horizontal and the last one is ratio analysis. In the given
report, the ratio analyses have been considered. The analyses have been made with reference to
the accounting ratios for profitability as well as liquidity. After the analyses, the appropriate
conclusion and the recommendation has been suggested as to whether the investors shall invest
in this company or not keeping in consideration all the analyses made from the financial
statements.
NAME OF COMPANY AND NATURE OF BUSINESS
For the purpose of conducting the analyses, the financial data of company – Tesla Inc has been
taken. Tesla Inc formed in the year of two thousand and thirteen in Delaware, United States of
America. Its headquarters are located in Palo Alto, California, United States of America. The
company is engaged in the manufacturing of the all types of electric vehicles, storage devices for
energy and solar panel. The company has the production facilities and plants for assembly at
different locations. Since the year of its operations, the company has been earning profits and
good reputation in the market. The company uses the calendar year as the financial year and ends
the financial statements by 31st of December of each year. Therefore the form 10K has been
considered for obtaining the data and figures.
ANALYSING THE POSITION OF THE COMPANY
Position is related to the standing as on particular date. In the common parlance if the personnel
working in an organization has been promoted from Manager to Director of the company then
the position of that personnel earlier was Manager and now he is working ad Director of the
company (Anastasia, 2015). The position is identified at the particular point of time. Similarly in
case of company the financial position of the company can obtained only at the particular date

and point of time. For instance, the company provides the financial statements on 31st of
December 2017 then the financial position can be judged only on that day itself.
The position of the company is analysed through the statement of the affairs or the balance sheet
of the company as the case may be. Financial position will not only help in assessing the net
worth of the company but also helps in the knowing of the fact as to whether the company has
enough liquid funds, whether the assets have been correctly valued or not, whether the company
is able to achieve its short term liabilities as and when it becomes due and whether the
company’s long term liabilities as stated in the balance sheet is at par or it has exceeded the
limits and so on (Taylor, 2011). For making analyses the financial ratios have been calculated
and then analyses have been made. Ratio has been calculated under the four major headings. One
is profitability ratios, second is Liquidity ratio, third is Leverage Ratio and the last is the
efficiency ratio. The ratios have been calculated for two years ending the 31st of December 2017
and 31st of December 2016. It is because the benchmark as 2016 figures has been considered for
the purpose of the analyses. The financial ratios have been calculated and identified and
accordingly the analyses have been made.
Liquidity Ratio – Liquidity ratio is one of the best measure through which the manager of the
company can judge or assess the ability of the company to repay the short term liabilities
including the liabilities towards the expenses. If the company is not maintaining its liquidity ratio
at good level there will be chances that the company will go bankrupt or insolvent. Directors of
the company are separately more concerned when the company fails to serve the interest and
principal obligations when it falls due (Delen, 2013). It is because the liability of the directors of
the company will be personal if the deposit of liabilities has not been maintained.
- Current Ratio – It is one of the basic ratios which every company considers before
finalizing the financial statements of the company. At first the current ratio is the
financial ratio which helps in comparing the current assets and current liabilities. It
compares as to whether the company will be able to make the payment of the liabilities
that is due in the near future and that too shall be paid within the period of one year. In
the given case of Tesla Inc, the current ratio for the year 2016 was 1.07 and for the year
2017 it was 0.86. The decrease in current ratio is the tremendous one. It means that the
current ratio has fallen down and it has been fallen by 80 cents. There are the chances

from the side of the company that there will be inability to pay off the short term
liabilities in near future. If the situation still persist then the there is high probability of
having the company insolvent. Therefore, the current ratio shall be worked out. .
- Quick Ratio – The quick ratio deals with the ability of the company to generate the cash
and its equivalent to pay off the liabilities. The deciding factor of the quick ratio is that
higher the quick ratio, higher are the chances for the company to pay off its debts as the
company will be able to meet off the liabilities very fast. For calculation of the quick
ratio the amount of inventory is reduced from the current assets. In the given case the
quick ratio for the year ending 31st of December 2017 is 0.56 and for the year ending 31st
of December 2016 as 0.72. There has also seen the decrease in percentage due to which
there are the high probability that the company might get itself as insolvent.
- Working Capital – Working capital is the capital which every company requires to
generate and operate the working capital cycle or the operating cycle. Without
mentioning the operating cycle and working capital required, no company can perform its
function very well. In simpler words working capital is the safety which is required to be
kept so as to meet the expenses in the near future. In the given case, the company has the
negative working capital of $1104150 thousands in 2017 and in 2016; the company has
positive working capital as $432791. It means that the working capital condition of the
company is not good in this year as compared to the earlier year. Due to negative
working capital neither any of the financial institutions will provide the finance to the
company nor would the company have the enough capital to fund their own leading to the
situation of short term insolvent.
Leverage Ratio / Solvency Ratio – The liquidity is related to the short term obligations and
related payments and the solvency ratio is related to future obligations for more than one year
and related payments. The leverage ratio helps in understanding what should be the structure of
the capital of the company so as to enable the company to obtain the debt financing so as to
maximize the return to the shareholders of the company (Drake, 2010). These ratios are very
important for every company in assessing the risk profile of the company. The leverage /
solvency ratios are mentioned below:

- Debt Ratio – It compares the total liabilities to the total assets of the company. It details
as to how much assets are there in paying the debt of the company. If the ratio is
decreasing then the capital structure of the company shall be regarded as less risky one
and in case the ratio is increasing then the capital structure of the company shall be
regarded as more risky one. In the given case, debt ratio has been increased from 0.74 in
the year 2016 to 0.80 in the year 2017. It means that the company has employed the high
risk capital structure which can any time prove as fatal to the organization.
- Debt to Equity Ratio – This ratio helps in making the comparison between the total
liabilities of the company and the total equity of the company including shareholders
funds and reserves and surplus. In the given case, Debt to equity ratio has been increased
from 3.52 in the year 2016 to 5.43 in the year 2017. The higher ratio is the alarming
situation for the company as higher the debt to equity ratio higher will be the chances that
company is at the risk of insolvency. Therefore, capital structure shall be maintained in
such a manner so as to avoid the situation of insolvency.
- Equity Ratio – Equity ratio details as to how much assets are related to the equity of the
company. Higher the ratio, lesser will be the chances of insolvency and lower the ratio,
higher will be the chances of insolvency. In the given case, Equity ratio has been
decreased from 0.21 in the year 2016 to 0.15 in the year 2017. Thus, the company has the
high risk of insolvency.
Efficiency Ratio – The efficiency ratio informs about the company as to how far the particular
assets or finance has been contributing towards the growth of the company. In other words, these
ratios helps in establishing the relationship between two items of the balance sheet and then the
contribution of one item towards the development of second item has been considered.
- Asset Turnover Ratio – This ratio helps in establishing the relationship between assets
and the turnover. It states that in what ratio the assets contribute towards the increase in
revenue. Higher the ratio, higher will be the efficiency of assets in generating revenue
and lower the ratio, lower will be the efficiency of assets and hence turnover will be less.
In the given case, asset turnover ratio has been decreased from 0.56 in the year 2016 to
0.46 in the year 2017. Therefore, the efficiency level is less.

Thus, in this manner, the analysis of the financial position of the company has been analyzed and
the overall opinion is that the financial position of the company is at high risk.
ANALYZING THE PERFORMANCE OF THE COMPANY
Extending the previous example, in case the appraisal of the same manager is required to be done
then it will be done on the basis of his or her performance over the concerned period. In the same
way as the financial position is judged by the balance sheet of the company, the financial
performance of the company is judged by the statement of the profit and loss of the company.
The balance sheet of the company is prepared at the end of the reporting period at the particular
date whereas the statement of the profit and loss has been prepared for the period ending
reporting period. It covers the whole period of twelve months from January 2017 to December
2017.
Financial performance will not help the users of the financial statements in assessing the growth
of the company but also help them to compare the same with previous year results so as to know
whether the company has made any growth from the past year to the current year or not. The
analysis of the financial performance of the company will be measured through the accounting
ratios under the heading of profitability and account observations under heading observations
and analysis of values (White, 2015). It wills details as to whether the company is in the
profitable situation or loss situation.
Observations - The profit and loss account of Tesla has shown the increase in revenue from
2016 to 2017 by $ 4758619. On the other hand, the cost of revenues that has been incurred to
have high revenue will also increase by $ 4135389. This will lead to increase in Gross Margin
which is $ 2222487 in 2017 as compared to $ 1599257 in 2016. The research and development
expense which is 12 % of revenue has been increased from $ 543665 in 2017 as compared to
2016. Interest expense for the year ended 31st December, 2017 has been increased by $ 272.4
million. In comparison to this other income which is generated from foreign exchange
transaction has shown a decrease of $ 236.7 in 2017. This leads to increase in net loss of $
2240578 in 2017 as against $ 773046 in 2016.
Analysis of Values in Profit and Loss - The revenue of the company has been increased due to
more automation in sales procedures by the company which is considered as positive step along

with increase in no of deliverable in vehicles by the company. The company cost to revenue in
comparison to revenue has also enhanced due to increase in volume of sales and also increase in
cost of maintenance services provided by the company. As the result, the gross margin has been
increased but has only to increased to cover up the variable costs of the company. The margin is
not contributing to net margin due to enhance of expenses for research and development and
interest expense which in turn helps in development of new products with enhanced volume but
ultimately not fulfilling the goal of stakeholder of profit maximization.
Profitability Ratio: To earn profit is the only motive of all the organization and is very
important for the survival of the company. It tells about the efficiency and effectiveness of the
operations of the company. The shareholders are interested in profit so as to know the increase in
return over the investment made, the creditors will be interested in knowing the ability of the
company to make the payment of the interest and the principal and even the managers of the
company are interested in knowing the profit as it is directly linked to their incentive and reward
plans. Following ratios have been detailed:
- Net Profit Margin – The net profit margin ratio helps in ascertaining the ability of the
company to generate profits from the sales made during the year. In the given case, the
net profit margin ratio has been decreased from negative 11.04% to negative 19.05%
from the year ending 2016 to 2017 respectively. It exhibits that the company has been
generating net loss at the end of the year and it further shows that company is not able to
generate the profits from the sales so as to set off the expenditure if any pending in this
regard. Thus, the company is working at loss from the last year.
- Return on Assets – This ratio helps in establishing the relationship by comparing the net
profit earned by the company during the year with the total assets of the company. It
basically represents the ability of the company to generate profits from the own assets of
the company. The deciding factor under this ratio is that higher the return on assets higher
will be the contribution of the assets in generating the net profit of the company and
lower the return on assets lower will be the contribution of the assets in generating the net
profit of the company (Lan, 2012). In the given case, the return on assets has been
decreased from negative 3.41% in the year ending 31st of December 2016 to negative
7.82% in the year ending 31st of December 2017. It exhibits that the company’s assets

are not being utilized in the effective and efficient manner through which the return on
assets have been decreased.
- Return on Equity - This ratio helps in establishing the relationship by comparing the net
profit earned by the company during the year with the shareholders equity of the
company. It basically represents the ability of the company to generate profits from the
funds provided by the shareholders of the company. The deciding factor under this ratio
is that higher the return on equity higher will be the contribution of the assets in
generating the net profit of the company and lower the return on equity lower will be the
contribution of the assets in generating the net profit of the company. In the given case,
the return on equity has been decreased from negative 16.26% in the year ending 31st of
December 2016 to negative 52.88% in the year ending 31st of December 2017. It shows
that the funds as provided by the shareholders of the company are not being utilized and
managed in the proper manner due to which the return on equity has become negative.
Thus, in this manner, the analysis of the financial performance of the company has been
analyzed and the overall opinion is that the financial performance of the company is very bad
and is not being controlled and managed in the defined manner.
CONCLUSION AND RECOMMENDATION
Financial statement forms the part of the annual report of the company. It plays very crucial role
from the eyes of the users of the financial statements. It is because of the fact that all the users of
the financial statements take their decision on the basis of that only. The report has analyzed in
detail the financial position and the financial performance of the company namely Tesla Inc. The
ratios showing the financial position has exhibited very clearly that the company is in higher risk
in relation to the liquidity as well the solvency. It means the company can become the insolvent
at any time. Similarly the negative impact has been seen in the statement of the profit and loss
showing the financial performance of the company. In order to conclude the report, the financial
position and the financial performance of the company is so bad that neither any investors nor
any potential investor will be happy o make an investment in the company.

It is recommended for the management of the company to first properly define the capital
structure in accordance with the needs of the company and then take the maximum benefits of
assets and funds of the company to generate the high profits.
REFERENCES
Anastasia, (2015), “Financial Statement Analysis : An Introduction” available on
https://www.cleverism.com/financial-statement-analysis-introduction/ accessed on 01-05-2018
Delen, D., (2013), “Measuring firm performance using financial ratios: A decision tree
approach”, Expert Systems with Applications, 40(10), pp.3970-3983.
Drake, P.P., (2010), “Financial ratio analysis” Handbook of Finance, 52(13), pp 42-44
Lan J, (2012), “16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses”,
available on http://www.aaii.com/journal/article/16-financial-ratios-for-analyzing-a-companys-
strengths-and-weaknesses.touch accessed on 01-05-2018.
Taylor, M., (2011), “Financial statement analysis”, Accounting Review, 205(15), pp 92-107.
White, G.L., (2015), “Analysis of Financial Statement”.,Accounting Review, 241(24), pp 21-33.
APPENDIX
FINANCIAL RATIOS FOR ANALYSES
1 TESLA INC
S.
NO. Particulars 2017 2016
a) Profitability :
(i) Profit Margin Ratio
(Net Income / Revenue)
Net Income -2240578 -773046
Revenue 11758751 7000132

Profit Margin
= -
2240578/11758751*10
0
= -
773046/7000132*100
-19.05% -11.04%
(ii) Return on Assets
(Net Income / Total Assets)
Net Income -2240578 -773046
Total Assets 28655372 22664076
Return on Asset
= -
2240578/28655372*10
0
= -
773046/22664076*10
0
-7.82% -3.41%
(iii) Return on Equity
(Net Income / Shareholder's Equity)
Net Income -2240578 -773046
Shareholders's Equity 4237242 4752911
Return on Equity
= -
2240578/4237242*100
= -
773046/4752911*100
-52.88% -16.26%
b) Liquidity :
(i) Current Ratio
(Current Assets / Current Liabilities)
Current Assets 6570520 6259796
Current Liabilties 7674670 5827005
Current Ratio = 6570520/7674670
= 6259796 /
5827005
0.86 1.07
(ii) Quick Ratio
(Quick Assets / Current Liabilities)
Quick Assets (Current Assets -
Inventories)

Current Assets 6570520 6259796
Inventories 2263537 2067454
Quick Assets 4306983 4192342
Current Liabilties 7674670 5827005
Quick Ratio = 4306983/7674670
= 4192342/
5827005
0.56 0.72
(iii) Working Capital
(Current Assets - Current Liabilities)
Current Assets 6570520 6259796
Current Liabilties 7674670 5827005
Working Capital ($ million) = 6570520 - 7674670
= 6259796 -
5827005
-1104150 432791
c) Leverage:
(i) Debt Ratio
(Total Debts / Total Assets)
Total Debt (Total Liabilities) 23022980 16750167
Total Assets 28655372 22664076
Debt Ratio 0.80 0.74
(ii) Debt to Equity Ratio
(Total Debts / Shareholders Fund)
Total Debt 23022980 16750167
Shareholders Fund 4237242 4752911
(Equity)
Debt to Equity Ratio 5.43 3.52
(ii) Equity Ratio
(Shareholder Funds / Total Assets)

Shareholders Fund 4237242 4752911
(Equity)
Total Assets 28655372 22664076
Equity Ratio 0.15 0.21
d) Efficiency :
(i) Asset Turnover Ratio
(Revenue / Average Total Assets)
Revenue 11758751 7000132
Opening Total Assets 22664076 2153860
Closing Total Assets 28655372 22664076
Average Total Assets 25659724 12408968
{(Opening total Assets + Closing Total
Assets)/2}
Asset Turnover Ratio 0.46 0.56