Tesla: Financial Reports, Financial Ratios, and Financial and Economic Strategies

Case Study – Stage 1 Tesla
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Case Study – Stage 1 Tesla
This project will include financial reports, financial ratios, and the financial and economic strategies used by Tesla. These components are split into the following sections:
Financial Reports
The financial reports of Tesla include the three financial statements: income statement, balance sheet, and cash flow statements.
Income Statement
(MarketWatch, 2022)
Balance Sheet
(MarketWatch, 2022)
Cash Flow Statement
(MarketWatch, 2022)
Financial Ratios
The financial ratios of Tesla will include market value and short-term solvency ratios (price-earnings ratio, current ratio, and quick ratio), profitability and long-term solvency ratios (return on equity ratio, profit margin ratio, cash coverage ratio, and debt-to-equity ratio), along with asset management ratios (inventory turnover ratio, net working capital turnover ratio, and total assets turnover ratio).
Market Value and Short-Term Solvency Ratios

Components

12/31/2021

Price-Earnings Ratio

Price of Stock/Earnings Per Share

1,056.78/7.37 = 143.39

Current Ratio

Current Assets/Current Liabilities

27.1/19.705 = 1.38

Quick Ratio

(Current Assets Less Inventory and Prepaid Costs)/Current Liabilities

19.62/19.705= 0.996

The price-earnings ratio measures the price of a company’s stock against its earnings. Tesla’s relatively high price-earnings ratio indicates a high expectation and confidence among investors of high growth rates in the future. On the other hand, the current ratio is a measure of the financial strength of a company, particularly its liquidity (Aziz & Rahman, 2017). Tesla appears to be in a good position to pay its short-term debts using its liquid assets: a ratio above one usually indicates a company's liquidity. Conversely, the quick ratio measures a company's short-term cash flow situation. Tesla may experience a little difficulty in settling its current liabilities using its liquid assets: the company must work towards achieving a quick ratio of 1 or more.
Profitability and Long-Term Solvency Ratios

Components

12/31/2021

Return on Equity

Net Income/Average Shareholders’ Equity * 100

5.52/((31.01 + 23.07)/2) * 100 = 20%

Profit Margin

Net Income/Revenues * 100

5.52/53.8 * 100 = 10%

Cash Coverage Ratio

Total Cash and Cash Equivalents/ Total Current Liabilities

17.707/19.705 = 0.90

Debt-To-Equity Ratio

Total Debt/Shareholder Equity * 100

5.245/31.01 * 100= 17%

Return on equity measures a company's efficiency in making a profit. Tesla is currently well-placed in terms of profit generation. On the other hand, the profit margin measures how a company spends its profits. Tesla is presently using a tenth of its profits in revenue generation: this figure also indicates that the company is making go...