Milestone One
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Oliveira 1
Milestone One
Phillip Oliveira
Southern New Hampshire University
FIN-320: Principles of Finance
Professor George Mwangi
January 21, 2024
Oliveira 2
Business Selection
In an effort to focus on the meticulous analysis and evaluation of a business’s financial health, I have chosen Tesla (TSLA) as the subject of scrutiny in this milestone. This effort will be
accomplished through delving into the intricate details of Tesla’s financial landscape – including the balance sheet, income statement, and cash flow statement. These figures are current as of the first quarter of 2024 (January 18
th
, to be exact).
Financial Statements
Through the use of Mergent Online
, a financial database and research tool that provides comprehensive and detailed information on public and private companies worldwide, we will derive key statements in order to gain an accurate financial picture of our chosen company. These statements include: Total Assets, Total Liabilities, Current Assets, Current Liabilities, Net Income, Shares Outstanding, Earnings per Share (EPS), Total Revenue, Shareholders’ Equity. As of the latest available data, Tesla’s (TSLA) financial landscape reveals noteworthy metrics: Total Assets stand at $93.941 million (Mergent, 2024), while Total Liabilities are reported at $40.475 million (Mergent, 2024). Current Assets and Current Liabilities are recorded at $40.917 million and $26.709 million, respectively (Mergent, 2024). Furthermore, Net Income for the period amounts to $10.754 million, with 3.18 billion Shares Outstanding and an Earnings per Share (EPS) of $3.41 (Mergent, 2024). The company's robust performance is underscored by a Total Revenue of $95.924 billion, contributing to a Shareholders' Equity of $44.704 million as of December 31, 2022 (Mergent, 2024). These figures collectively provide a comprehensive
Oliveira 3
overview, paving the way for a thorough examination of the financial dynamics at play within our chosen corporate entity.
Financial Statement Roles
Financial statements play a crucial role in providing a comprehensive and organized summary of a business’s financial performance and position. Moreover, “understanding the financial health of a business by reviewing its financial statements is also important to the financial manager, whose goal is to determine how to increase the value of the firm.” (Titman, et al., 2023) In order to achieve these objectives, one must pay close attention to three very important documents: the Income Statement, “also called a profit and loss statement
, [which] measures the amount of profits generated by a firm over a given time period (usually a year or a quarter)” (Titman, et al., 2023); the Balance Sheet, which “is a snapshot of the firm’s financial position on a specific date –” (Titman, et al. 2023) and finally, the Cash Flow Statement, which “firms use to explain changes in their cash balances over a specific period of time (i.e., one year or one quarter).” (Titman, et al. 2023)
The Income Statement achieves these objectives due to its ability to help businesses assess their profitability over a specific period – and in its most basic form, can be derived through the equation, “
Revenues (Or Sales) – Expenses = Profits.
”
(Titman, et al., 2023) This is because profits are regarded as the “differences between the firm’s revenues and the expenses it incurred in order to generate those revenues for the period.” (Titman, et al., 2023)
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Oliveira 4
Furthermore, the Balance Sheet also plays a crucial role in these efforts through highlighting a company’s assets & liabilities, helping to evaluate its liquidity and ability to meet short-term obligations. “In its simplest form, the balance sheet is defined by the following equation: Total Assets
= Total Liabilities + Total Shareholder’s Equity” (Titman, et al., 2023)
Lastly, we come to the Cash Flow Statement, which allows for the practice of the infamous, Cash Flow Analysis. Like the other two financial statements, this one can also be boiled down to an equation: “
Change in Cash Balance
= Ending Cash Balance – Beginning Cash Balance.” (Titman, et al., 2023) As stated before, Cash Flow Analysis allows for the evaluation of expenditures over a specific period of time, and can be interpreted though the Quality of Earnings ratio, in which we divide the Cash Flow from Operations / Net Income of the company. (Titman, et al. 2023)
Cash Flow Management
Cash flow management is crucial to a company’s overall financial health and operational sustainability both in the short term and especially in the long term. It ensures that the company can navigate financial challenges, capitalize on opportunities, and maintain the confidence of stakeholders. It is safe to say that no one is immune to its power. The recent one-year anniversary of Elon Musk’s troubled Twitter (X) takeover serves as a
vivid illustration of the importance of these facts. Hesitant from the very beginning of the acquisition, “Musk said in an October 2022 Tesla earnings call … [that] he was ‘obviously
Oliveira 5
overpaying for Twitter right now,’ though he believed the company’s long-term potential was ‘an
order of magnitude greater than its current value.” (Skipworth, 2023) You see, Musk envisioned a “Public Town Square,” (X, 2022) in which free speech would ‘reign,’ radically opposing Twitter’s previous views and ways of operating. While most might agree that the implementations of major changes such as these would be likely candidates for the potentially negative cash flow problems, surprisingly it wasn’t – as Musk was reported to “cut costs significantly, by culling 80% of staff, shutting down data centers, [and] selling off Twitter-branded artifacts.” (Hutchinson, 2023) The issue here was the man himself – as a series of controversial tweets, most recently antisemitic, caused the social media company’s ad revenue to “plunge roughly 50%.” (Napolitano, 2023)
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References:
Mergent Online. (21 January 2024). Tesla Inc.
https://www-mergentonline-
com.ezproxy.snhu.edu/companyfinancials.php?
pagetype=asreported&compnumber=129614&period=Annuals&dataarea=BS&range=3¤
cy=AsRep&scale=AsRep&Submit=Refresh&csrf_token_mol=6b2248b2f0
Titman, S., Keown, A. J., & Martin, J. D. (2023).
Financial Management: Principles and applications
.
https://plus.pearson.com/courses/urn:xl-hed:course:7514471/products/
FLLFUHL5GKZ/pages/aa5ae6d88e9adfd127feffe44917816bdb084eac0?
locale=&isTpi=Y&redirectURL=https://plus.pearson.com/
bookshelf&userPreferredType=read
Skipworth, W. (2023, October 30). X says it’s worth less than half what Elon Musk paid. Forbes
.
https://www.forbes.com/sites/willskipworth/2023/10/30/x-says-its-worth-less-than-half-
what-elon-musk-paid/?sh=37297eb97215
Elon Musk on X: “Given that Twitter serves as the de facto public town square, failing to adhere
to free speech principles fundamentally undermines democracy. What should be done?” / X
. (2022, March 25). X (Formerly Twitter). https://twitter.com/elonmusk/status/1507777261654605828?lang=en
Hutchinson, A. (2023, November 17). Major advertisers pull out of X, which could spark a bigger shift away from the app
. Social Media Today. https://www.socialmediatoday.com/news/major-advertisers-pull-out-x-could-spark-a-
bigger-shift/700250/
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Oliveira 7
Napolitano, E. (2023, July 17). Musk reveals Twitter ad revenue is down 50% as social media competition mounts. CBS News
. https://www.cbsnews.com/news/twitter-traffic-falls-
under-elon-musk-threads-mastodon-bluesky-competition/
Sloan, A. (2023, November 3). Elon Musk isn’t the only one who lost a ton of money on X this year
. Fast Company. https://www.fastcompany.com/90977529/elon-musk-isnt-the-only-
one-who-lost-a-ton-of-money-on-x
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