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Tesla Analysis

2007 words - 9 pages

Financial Statement Analysis for Tesla Motors


There are a lot of automobile companies in the world and some of them have special technologies of their own. The technology industry is not as competitive as other industries. It requires highly technological innovations to operate efficiently. As long as companies keep coming up with new creative design ideas, the industry will keep producing products and making profit, but it is not easy for any company, even Tesla Motors. Tesla Motors successfully used battery technology on their automobiles, which leads the company in the electric automaker field.

In the automotive industry, some auto companies use specialized ...view middle of the document...

In segment 2, Tesla Motors increases the number and variety of electric vehicles (EV) in the world. It made EVs available to mainstream consumers by selling its own vehicles in its own showrooms and online, and selling power train components to other automakers.

Its company headquarters is located at 3500 Deer Creek Rd, Palo Alto, CA, USA. Tesla had Fiscal Year End (FYE) 12/31/2013 sales of $2,013 million and has 5,859 full-time employees according to its current company profile. As of today, Tesla Motors’ stock price closed at $281.10 per share.

Ratio Analysis

To understand Tesla’s financial situation, we are going to use some key financial ratios to explain the situation.

First, the Current Ratio measures the company’s ability to pay short-term obligations with its short-term assets. A higher current ratio means the company is more capable of paying its obligations. In 2013, Tesla had a current ratio of 1.88 compared to another technology industry like Google, which had a current ratio of 4.58 in 2013. Since the current ratio is above 1, it means that Tesla is capable of paying off its obligations. Google has a much higher current ratio than Tesla, which means Google is more capable of paying off its obligations, but it also means Google may not be efficiently using its current assets. Current ratio figures show the ratio change of both companies in the last 3 years. The current ratio formula and calculation is as follows:

Current Ratio=Current AssetsCurrent Liabities =$1,265,939.00$675,160.00=1.88

By reviewing the current ratio of a company, investors can evaluate the liquidity of the company, meaning that one can transform an asset to cash quickly (an asset is all valuable things that can be converted into cash). Liquid assets (for example, stocks, government bonds) are more easily converted into cash than illiquid assets (for example, houses or land). Investors or shareholders are safer to invest liquid rather than illiquid assets because they can get cash back easier from liquid assets.

Second, the Receivable Turnover Ratio is an activity ratio that measures how many times a company can change the account receivable into cash in a fiscal year. A higher receivable turnover ratio means the company can collect its average accounts receivable multiple times in a fiscal year. Tesla Motors has receivable turnover ratio of 17.29 times in 2013. On the other hand, Google has receivable turnover ratio of 6.74 in 2013. Tesla has more receivable turnover in 2013. The ratio of 17.29 means Tesla collected its average receivables 17.29 times in 2013. The Receivable Turnover ratio formula and calculation is as follows:

Receivable Turnover=Net Credit SalesAverage Accounts Receivable=$848,901$49,109=17.29

Receivable turnover radio measures the efficiency of a company in collecting money from customers. It is favorable of a high receivable turnover ratio because high receivable turnover ratio means this company...

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