Week 3 Assignment

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Week 3 Assignment Financial Statements of Tesla By: Sai Raghu Veer Gopularam 1

INTRODUCTION TO FINANCIAL STATEMENTS An annual report provides four basic financial statements. The balance sheets. The income statement, The statement of cash flows The statement of Retained Earnings. A Financial Statement provides an accounting-based picture of a firm’s financial position. Whereas accountants use reports to present a picture of what happened in the past, finance professionals use financial statements to draw inferences about the future. The four statements function to provide key information to managers, who make financial decisions, and to investors, who will accept or reject possible future investments in the firm. When you encountered these four financial statements in accounting classes, you learned how they function to place the right information in the right places. These statements, which are the “right places” for crucial information, create a solid base for our understanding of decision-making processes in managerial finance. (Cornett,et,al,(2023) REVIEW OF LITERATURE According to Amal Almenhali (2021) It has been noted that the company's total financial standing is now more significant in the marketplace. Tesla’s financial performance over the past four years has been sustainable with no risk of liquidation and debt solvency in terms of liquidity, cash flows, and debt position. On the other hand, it has been discovered that Tesla has significantly underperformed in terms of asset utilization, receivables management, and net income margin. Therefore, it is recommended that management provide money and asset management greater attention in addition to concentrating more on prompt debt collection and cost-control monitoring. Operations would become more efficient, and in the long run, the profitability forecast would improve. According to Jingyuan Fang1, *(2022) The need for sustainable development has grown in recent years, and as a result, most people worldwide now generally agree that traveling in a low- carbon manner is preferable, giving rise to the electric vehicle sector. One of the top businesses in this sector is Tesla. As a result, the primary focus of this article's analysis of Tesla's performance will be finance. Gaining a better grasp of Tesla's financial situation and performance from 2018 to 2020 is the main goal of this study. The primary technique used in this 2

comprehensive financial analysis is ratio analysis, which is based on information gathered from Tesla's annual report. Finally, we may conclude that Tesla is a promising company based on these several financial analysis factors. ABOUT THE COMPANY THE BIRTH OF TESLA There are many well-known automakers in the United States, including Ford (F), Honda (HMC), and Chevrolet (GM). However, Tesla Motors (TSLA), a manufacturer of electric cars, sticks out from the rest. After the Model S, the company's flagship vehicle, was introduced in 2012, Tesla and its CEO, Elon Musk, rose to prominence. With its launch, Tesla established itself as one of the few prosperous independent automakers and a leader in the electric vehicle industry. Notably, car buyers also found it to be popular. In every category for electric sedans, the Model S, a sophisticated luxury vehicle with a starting price of $89,490, is rated best in class. Tesla made news when the Model S debuted in 2013 and received accolades from trade publications. Consumer Reports gave the electric plug-in automobile an almost flawless score of 99 out of 100, referring to it as "the best car ever tested." With 2,500 sales in a single month by September 2014, the automobile broke all previous records for U.S. sales, and in Q1 2015, sales set a record 10,030 units. It is now regarded as a standard in the world of electric vehicles. The corporation had a $909.6 billion market capitalization as of March 4, 2022. 3

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Despite what many people think, Tesla did not become successful overnight. Martin Eberhard and Marc Tarpenning, two engineers from Silicon Valley, started the business in 2003 with the goal of demonstrating that "electric vehicles can be better, quicker, and more fun to drive than gasoline cars." The company's origins may be traced back to 1990, when Tarpenning, then an engineer at Wyse Technology, met and grew close to Eberhard. The two were passionate about founding businesses, which was one of their many similar interests. They immediately founded NuvoMedia, which published the Rocket eBook in 1998. Elon Musk, CEO of Tesla Elon Musk, who has emerged as Tesla's spokesperson, is frequently confused for the company's creator. Musk is a Canadian-American native of South Africa who received engineering training. The University of Pennsylvania awarded him a dual bachelor of science degree in Economics and Physics. Nevertheless, at his core, he is an inventor and businessman. Musk enrolled in Stanford's Ph.D. program in Applied Physics in 1995, but he left to concentrate on his commercial ventures in the fields of space exploration and renewable energy. He soon started a number of little, prosperous businesses, such as Zip2, an online publishing platform. Musk founded X.com, an online bank that Confined later purchased, with the proceeds from that deal. FINANCIAL STATEMENT SUMMARY 4

HIGHLIGHTS Profitability $8.9B GAAP operating income in 2023; $2.1B in Q4 $15.0B GAAP net income in 2023; $7.9B in Q4 $10.9B non-GAAP net income1 in 2023; $2.5B in Q4 One-time non-cash tax benefit of $5.9B recorded in Q4 for the release of valuation allowance on certain deferred tax assets In 2023, delivered over 1.2 million Model Ys, making it the best-selling vehicle, of any kind, globally. For a long time, many doubted the viability of EVs. Today, the best-selling vehicle on the planet is an EV. Free cash flow remained strong in 2023 at $4.4B, even as we focused on future growth projects with highest capital expenditures and R&D expenses in company history. Energy storage deployments reached 14.7 GWh in 2023, more than double compared to the previous year, while Energy Generation and Storage business profits nearly quadrupled in 2023. Gross profit of our Services & Other business increased from a ~$500M loss in 2019 to a ~$500M profit in 2023. Cost of goods sold per vehicle5 declined sequentially in Q4. 6

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Company remains focused on growing output, investing in future growth and finding additional cost efficiencies in 2024. In late December, started rolling out V12 of FSD Beta6. Trained on data from a fleet of over a million vehicles, this system uses AI to influence vehicle controls (steering wheel, pedals, indicators, etc.) instead of hard-coding every driving behavior. V12 marks a new era in the path to full autonomy. Company focused on bringing the next generation platform to market as quickly, with the plan to start production at Gigafactory Texas. This platform will revolutionize how vehicles are manufactured. Cash Operating cash flow of $13.3B; free cash flow2 of $4.4B in 2023 Operating cash flow of $4.4B; free cash flow of $2.1B in Q4 $3.0B increase in our cash and investments3 in Q4 to $29.1B Operations Model Y became the best-selling vehicle in the world4 Energy storage deployment of 14.7 GWh in 2023, 125% growth FACTORS AFFECTING CASHFLOW AND BUGET OF TEXLA FOR NEXT DECADE DEPENS ON THE FOLLOWING FACTORS Revenue Growth: Tesla's revenue growth is probably going to have an impact on its cash flow. Positive cash flow may result from the company's continued efforts to grow sales, add new products, and increase market share. Production and Supply Chain Management: Tesla's cash flow and expenses may be impacted by how well its supply chain management and production procedures work. Simplifying these processes can result in lower expenses and better cash flow. Investments in Technology and Innovation: Due to Tesla's dedication to these areas, considerable funds may be spent on research and development. Although these investments have the potential to spur future growth, they can have an effect on budgetary and short-term cash flow issues. Regulatory Environment: Modifications to laws governing electric cars, environmental laws, or renewable energy subsidies may have an effect on Tesla's business operations and financial results. 7

Global Economic Conditions: Tesla's sales and financial performance can be impacted by changes in consumer demand, financing choices, and general market dynamics. Competitive Landscape: Tesla's pricing strategy, market share, and profitability may be impacted by the competitive climate in the electric car market, which may have an effect on cash flow and budgetary considerations. Government Subsidies and Incentives: In several areas, Tesla has profited from government subsidies for electric cars. A modification to these incentives may have an impact on the company's financial prospects. Consumer Trends: Tesla's sales and cash flow may be impacted by changing consumer demands and preferences for renewable energy sources, electric cars, and other goods. Capital Expenditures: Tesla's intentions to establish new factories or increase the number of Superchargers it has could have an influence on its cash flow and budget.. 8

CALCULATION OF NPV the discounting factor of 10%? Example #2 1. DF for Year 1 = (1 + 10% ) -1 =0.9091. 2. DF for Year 2 = (1 + 10% ) -2 = 0.8264. 3. DF for Year 3 = (1 + 10% ) -3 = 0.7513. 4. DF for Year 4 = (1 + 10% ) -4 = 0.6830. 5. DF for Year 5 = (1 + 10% ) -5 = 0.6209. Year Net Profit($,000) 10% present values ($,000) 2023 14997 0.909 13632.273 2022 12556 0.826 10371.256 2021 5519 0.751 4144.769 2020 721 0.683 492.443 2019 -862 0.621 -535.302 Total present values 28105.439 less original investment 7500 Net Present value 20605.439 Estimating for 2030 =TotalPresentValues×(1+0.10) 2030−2023 Substitute the values: FV_{2030} = $28,105.439 \times (1 + 0.10)^{7} $54769.000 9

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WEB Links Wikipedia. Tesla, Inc. Retrieved from: https://en.wikipedia.org/wiki/Tesla,_Inc . Financials. Income Statement. WSJ Markets. Retrieved from: https://www.wsj.com/market- data/quotes/TSLA/financials/annual/income-statement BOOKS “Finance applications & Theory “ by cornett.el.al(2023) JOURNALS Almenhali, Amal and Alhajeri, Huda and Almansoori, Huda and Aljneibi, Nafeja and Almansoori, Nora and Alsulaity, Nouf and Mohammed, Yousuf and Nobanee, Haitham and Nobanee, Haitham, Financial Analysis of Tesla (July 31, 2021). Available at SSRN: https://ssrn.com/abstract=3896901 or http://dx.doi.org/10.2139/ssrn.3896901 . “An Overall Financial Analysis of Tesla” Jingyuan Fang1, (2022)Atlanta Press, Advances in Economics, Business and Management Research, volume 219 Proceedings of the 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022) 10