Tesla Motors Financial Analysis

Topics: Generally Accepted Accounting Principles, Balance sheet, Asset Pages: 9 (2342 words) Published: October 17, 2014


Tesla Motors, Inc.
Financial Analysis Project
Accounting II – Dr. Frazer
Themistoklis Tambassopoulos

Introduction

In this paper I intend to provide a sound financial analysis of Tesla Motors Incorporated. I will do so by calculating and providing liquidity, profitability, and solvency ratios and then evaluating those results. Assessment of these ratios will more or less define Tesla Motors’ abilities to meet its short-term debts and obligations (liquidity), performance in relation to sales, assets, and profits or losses (profitability), and the resulting income amount, after tax deductions, against the company’s liabilities (solvency). Additionally I will compare Tesla Motors’ financial position against that of General Motors Company to better describe how the company is performing within its industry.

The Earth is in danger of rapidly overheating. Global warming is the widely accepted theory that states that the over production of air pollutants such as carbon dioxide will cause the Earth’s average temperature to rise annually until it reaches an irreversible threshold which will cause the planet to heat up so much it will become uninhabitable. Automobiles have been a major contributor to air pollution over the years. Gasoline fueled engines have churned out unimaginable amounts of gasses into the atmosphere adding to the problem. Until recently there have been no viable alternative vehicles to gasoline fueled cars. Even hybrid cars haven’t fully taken away the dependency for gasoline. Fully electric cars can reduce our dependency on fossil fuels, reduce greenhouse gas emissions, and hopefully reverse the damage done to Earth’s atmosphere. Tesla Motors is the electric car manufacturer paving the road to this greener world.

Background
Tesla Motors is a United States car manufacturing company based in Palo Alto California. The company was founded by Martin Eberhard and Marc Tarpenning in July 2003. The historic electrical engineer and physicist, Nikoka Tesla, is the source of Tesla Motors’ company name and is very fitting. The alternating current motor used in the Tesla Roadster is actually derived from Nikola Tesla’s original 1882 design.

Tesla Motors is a publically traded company that produces fully electronic vehicles. Tesla Motors began to put itself on the map when it produced the Tesla Roadster – the first fully electric sports car. Following the Tesla Roadster was a fully electric luxury sedan called the Model S.

The Tesla Roadster was a huge success for the company. It was an all-electric sports car capable of traveling more than 200 miles on a single charge. It was extremely innovative and the first fully electronic automobile to use lithium-ion battery cells. The Roadster was featured on the cover of Time Magazine and received their “Best Inventions 2006 – Transportation Invention” award. The first one hundred Tesla Roadsters sold out in less than three weeks.

The Model S is the current standard Tesla vehicle in production today. The car was first announced in 2008 and hit the US retail market in June 2012. The Model S with its highest battery option could reach distances as far as 265 miles in a single charge. This car has been Tesla Motor’s highest achievement yet being the recipient of several awards including “Car of the Year” for both Motor Trend and World Green Car magazines in 2013 and also Time Magazine’s “Best 25 Inventions of the Year 2012” award.

Tesla Motors has plans to begin production on its newest car, the Model X, beginning in 2014. Ratio Analysis
Liquidity
Investors or creditors use liquidity ratios to help them determine if a company is a safe investment or how likely they are to repay a debt. Liquidity is a measure of a company’s ability when it comes to repaying continuing debts as they come due. For most liquidity ratios, analysts are looking for high numbers; the higher the value the better that...


References: 1. Financial & Managerial Accounting 16th Edition – Williams et al.
2. Yahoo Finance: Tesla Motors, Inc. (TSLA) – www.finance.yahoo.com
3. Tesla Motors Website – www.teslamotors.com
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