Using the four-year financial statements of Tesla 2017-2020 (Appendix 2), evaluate and explain the profitability, solvency, liquidity, activity and market dimensions of Tesla’s financial performance highlighting the main weaknesses and strengths of Tesla. Consolidated Statements of Cash Flows (in millions of $) Items 2017 2018 2019 2020 Cash Flows from Operating Activities Net income (loss) (2,241) (1,063) (775) 862 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, amortization and impairment 1,636 1,901 2,154 2,322 Stock-based compensation 467 749 898 1,734 Amortization of debt discounts and issuance costs 91 159 188 180 Inventory and purchase commitments write-downs 132 85 193 202 Loss on disposals of fixed assets 106 162 146 117 Foreign currency transaction net loss (gain) 52 (2) (48) 114 Loss (gain) related to SolarCity acquisition 58 --- --- --- Non-cash interest and other operating activities 135 49 186 228 Operating cash flow related to repayment of discounted convertible senior notes --- — (188) — Changes in operating assets and liabilities, net of effect of business combinations: Accounts receivable (25) (497) (367) (652) Inventory (179) (1,023) (429) (422) Operating lease vehicles (1,523) (215) (764) (1,072) Prepaid expenses and other current assets (72) (82) (288) (251) Other non-current assets (15) (207) 115 (344) Accounts payable and accrued liabilities 388 1,797 646 2,102 Deferred revenue 469 406 801 321 Customer deposits 170 (96) (58) 7 Resale value guarantee 209 Other long-term liabilities 81 (25) (5) 495 Net cash provided by operating activities (61) 2,098 2,405 5,943 Cash Flows from Investing Activities Purchases of property and equipment excluding finance leases, net of sales (3,415) (2,101) (1,327) (3,157) Purchases of solar energy systems, net of sales (667) (218) (105) (75) Receipt of government grants --- — 46 123 Purchase of intangible assets --- — (5) (10) Business combinations, net of cash acquired (115) (18) (45) (13) Net cash used in investing activities (4,197) (2,337) (1,436) (3,132) Cash Flows from Financing Activities Proceeds from issuances of common stock in public offerings, net of issuance costs 400 — 848 12,269 Proceeds from issuances of convertible and other debt 7,138 6,176 10,669 9,713 Repayments of convertible and other debt (3,995) (5,247) (9,161) (11,623) Repayments of borrowings issued to related parties (165) (100) — — Collateralized lease repayments 511 (559) (389) (240) Proceeds from exercises of stock options and other stock issuances 259 296 263 417 Principal payments on finance leases (103) (181) (321) (338) Debt issuance costs (63) (15) (37) (6) Purchase of convertible note hedges (204) — (476) — Proceeds from settlement of convertible note hedges 287 --- --- --- Proceeds from issuance of warrants 53 — 174 — Payments for settlements of warrants (230) Proceeds from investments by noncontrolling interests in subsidiaries 790 437 279 24 Distributions paid to noncontrolling interests in subsidiaries (262) (227) (311) (208) Payments for buy-outs of noncontrolling interests in subsidiaries --- (6) (9) (35) Net cash provided by financing activities 4,416 574 1,529 9,973 Effect of exchange rate changes on cash and cash equivalents and restricted cash 40 (23) 8 334 Net increase in cash and cash equivalents and restricted cash 198 312 2,506 13,118 Cash and cash equivalents and restricted cash, beginning of period 3,767 3,965 4,277 6,783 Cash and cash equivalents and restricted cash, end of period 3,965 4,277 6,783 19,901 Supplemental Non-Cash Investing and Financing Activities Equity issued in connection with business combination 10 — 207 — Acquisitions of property and equipment included in liabilities 914 249 562 1,088 Estimated fair value of facilities under build-to-suit leases 313 94 — — Supplemental Disclosures Cash paid during the period for interest, net of amounts capitalized 183 381 455 444 Cash paid during the period for taxes, net of refunds 66 35 54 115
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Using the four-year financial statements of Tesla 2017-2020 (Appendix 2), evaluate and explain the profitability, solvency, liquidity, activity and market dimensions of Tesla’s financial performance highlighting the main weaknesses and strengths of Tesla.
Consolidated Statements of (in millions of $) |
|||||
Items | 2017 | 2018 | 2019 | 2020 | |
Cash Flows from Operating Activities | |||||
Net income (loss) | (2,241) | (1,063) | (775) | 862 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|||||
1,636 | 1,901 | 2,154 | 2,322 | ||
Stock-based compensation | 467 | 749 | 898 | 1,734 | |
Amortization of debt discounts and issuance costs | 91 | 159 | 188 | 180 | |
Inventory and purchase commitments write-downs | 132 | 85 | 193 | 202 | |
Loss on disposals of fixed assets | 106 | 162 | 146 | 117 | |
Foreign currency transaction net loss (gain) | 52 | (2) | (48) | 114 | |
Loss (gain) related to SolarCity acquisition | 58 | --- | --- | --- | |
Non-cash interest and other operating activities | 135 | 49 | 186 | 228 | |
Operating cash flow related to repayment of discounted convertible senior notes |
--- | — | (188) | — | |
Changes in operating assets and liabilities, net of effect of business combinations: |
|||||
(25) | (497) | (367) | (652) | ||
Inventory | (179) | (1,023) | (429) | (422) | |
Operating lease vehicles | (1,523) | (215) | (764) | (1,072) | |
Prepaid expenses and other current assets | (72) | (82) | (288) | (251) | |
Other non-current assets | (15) | (207) | 115 | (344) | |
Accounts payable and accrued liabilities | 388 | 1,797 | 646 | 2,102 | |
Deferred revenue | 469 | 406 | 801 | 321 | |
Customer deposits | 170 | (96) | (58) | 7 | |
Resale value guarantee | 209 | ||||
Other long-term liabilities | 81 | (25) | (5) | 495 | |
Net cash provided by operating activities | (61) | 2,098 | 2,405 | 5,943 | |
Cash Flows from Investing Activities | |||||
Purchases of property and equipment excluding finance leases, net of sales |
(3,415) | (2,101) | (1,327) | (3,157) | |
Purchases of solar energy systems, net of sales | (667) | (218) | (105) | (75) | |
Receipt of government grants | --- | — | 46 | 123 | |
Purchase of intangible assets | --- | — | (5) | (10) | |
Business combinations, net of cash acquired | (115) | (18) | (45) | (13) | |
Net cash used in investing activities | (4,197) | (2,337) | (1,436) | (3,132) | |
Cash Flows from Financing Activities | |||||
Proceeds from issuances of common stock in public offerings, net of issuance costs |
400 | — | 848 | 12,269 | |
Proceeds from issuances of convertible and other debt | 7,138 | 6,176 | 10,669 | 9,713 | |
Repayments of convertible and other debt | (3,995) | (5,247) | (9,161) | (11,623) | |
Repayments of borrowings issued to related parties | (165) | (100) | — | — | |
Collateralized lease repayments | 511 | (559) | (389) | (240) | |
Proceeds from exercises of stock options and other stock issuances | 259 | 296 | 263 | 417 | |
Principal payments on finance leases | (103) | (181) | (321) | (338) | |
Debt issuance costs | (63) | (15) | (37) | (6) | |
Purchase of convertible note hedges | (204) | — | (476) | — | |
Proceeds from settlement of convertible note hedges | 287 | --- | --- | --- | |
Proceeds from issuance of warrants | 53 | — | 174 | — | |
Payments for settlements of warrants | (230) | ||||
Proceeds from investments by noncontrolling interests in subsidiaries | 790 | 437 | 279 | 24 | |
Distributions paid to noncontrolling interests in subsidiaries | (262) | (227) | (311) | (208) | |
Payments for buy-outs of noncontrolling interests in subsidiaries | --- | (6) | (9) | (35) | |
Net cash provided by financing activities | 4,416 | 574 | 1,529 | 9,973 | |
Effect of exchange rate changes on cash and cash equivalents and restricted cash |
40 | (23) | 8 | 334 | |
Net increase in cash and cash equivalents and restricted cash | 198 | 312 | 2,506 | 13,118 | |
Cash and cash equivalents and restricted cash, beginning of period | 3,767 | 3,965 | 4,277 | 6,783 | |
Cash and cash equivalents and restricted cash, end of period | 3,965 | 4,277 | 6,783 | 19,901 | |
Supplemental Non-Cash Investing and Financing Activities | |||||
Equity issued in connection with business combination | 10 | — | 207 | — | |
Acquisitions of property and equipment included in liabilities | 914 | 249 | 562 | 1,088 | |
Estimated fair value of facilities under build-to-suit leases | 313 | 94 | — | — | |
Supplemental Disclosures | |||||
Cash paid during the period for interest, net of amounts capitalized | 183 | 381 | 455 | 444 | |
Cash paid during the period for taxes, net of refunds | 66 | 35 | 54 | 115 |
Trending now
This is a popular solution!
Step by step
Solved in 3 steps