Financial statements are beneficial to any organization, whether for-profit or nonprofit. These documents are a rich source of necessary financial information to investors, creditors, suppliers, and other stakeholders and interested parties. As a company that has positioned itself and ridden on its status as an environmentalist, Tesla, Inc.'s financial status continues to be a matter of interest not just to the stakeholders but to the general public. This paper provides Tesla's financial statement review over the past three years and, based on these, derives the company's current financial health.
Balance Sheet
For three consecutive financial years, Tesla, Inc. has registered an increase in its total assets from $28.66 billion to $29.74 billion, then to $34. 31 billion in the years ended December 31, 2017, 2018, and 2019, respectively (Tesla, Inc., 2020). Notably, the company's liabilities also grew considerably over the stated period. During the said years, the business had current ratios of 1.13, 0.74, and 0.83, respectively (Macrotrends LLC, 2020). By September 2020, the current ratio was 1.64, while the Long-Term Debt to Equity ratio was 190.80, implying that the company has a long term-focus, having invested short-term finances in acquiring long-time assets. However, the overall effect is that Tesla, Inc (Macrotrends LLC, 2020). will have difficulties meeting its short-term financing obligations without additional external funding.
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Income Statement
Just as is the case with its assets, Tesla's revenue has been growing steadily over the past three years. From $11.76 billion in 2017 to 21.46 billion in 2018 and 24.58 in 2019 (Tesla, Inc., 2020), the company has been doing quite well in revenue generation. The gross profit also increased over the three years marking a positive move toward profitability, which has been a discussion issue for some time now. The second quarter of the fiscal year 2020 was another milestone in Tesla's profitability as the car manufacturer reported a net profit for the fourth straight quarter ever since its inception (Tesla, 2020). Furthermore, the company reported a $ 0.760 earnings per share for its third quarter of the 2020 fiscal year, equivalent to a 68.75 increase year-over-year (Tesla, 2020). This boosts Tesla's future growth as more investors are likely to come in and give it a more competitive edge against other industry players.
Cash Flow Statement
The company's net cash flow dipped significantly from $2.53 billion in 2016 to $198 million in 2017 but has increased steadily to $312 million in 2018 and $2.50 billion in 2019 (Macrotrends LLC, 2020). Cash flow from financial activities has been inconsistent, having dropped dramatically from $4.42 billion in 2017 to $574 million in 2018 before rising again to $1.53 billion in 2019 (Macrotrends LLC, 2020). Meanwhile, stock-based compensation has been on an upward trend over the three years.
The review reveals some positive trends in the company's financial statements; increasing gross profit and net profits, revenue, and earning per share. These factors in favor of the company are due to consumers' gradual shift to electric cars due to the vehicles' environment friendliness (Mehta & Bhavani, 2018). Furthermore, Tesla's automobiles offer clients much-needed convenience by allowing them to charge at home, thereby sparing them the cumbersome fueling process at the gas station (Mehta & Bhavani, 2018). The company's products help it stand out in the industry and gradually grow its client base. However, the process has also unearthed some negative trends. Whereas investing in long-term assets would be a good thing for the company, Tesla's choice to use short term-finances to acquire these assets is unhealthy for its operations. It makes the company dependent on additional external funding to meet its short-term funding obligations.
Despite growing its revenue and profits every year, Tesla. Inc's financial status is quite fragile, owing to its heavy dependence on additional financing to meet its short-term operating costs. However, the company has witnessed growing earning per share and subsequent year-over-year increases, capitalizing on reaffirming its future growth.
References
Macrotrends LLC. (2020). Tesla financial statements 2008-2020 . Macrotrends | The Long-Term Perspective on Markets. https://www.macrotrends.net/stocks/charts/TSLA/tesla/financial-statements
Mehta, A., & Bhavani, G. (2018). Financial Statements Analysis of Tesla. Academy of Accounting and Financial Studies Journal , 22 (6). https://www.researchgate.net/publication/330523457_Financial_Statements_Analysis_on_Tesla
Tesla, Inc. (2020). Annual report for the fiscal year ended December 31, 2019 . AnnualReports.com. https://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_TSLA_2019.pdf
Tesla. (2020). Q3 2020 Financial Results and Q&A Webcast . https://ir.tesla.com/
