Financial Performance Analysis of Tesla Inc.: An In-Depth Study of Financial Statements and Key Metrics (Essay Sample)

Financial Performance Analysis of Tesla Inc.: An In-Depth Study of Financial Statements and Key Metrics Name Institution Course Professor Date Financial Performance Analysis of Tesla Inc.: An In-Depth Study of Financial Statements and Key Metrics Introduction The literature analysis focuses on the financial position of Tesla, Inc., a US-based electric vehicle and clean energy firm. The research evaluation focuses on the company's financial statements for the past three years. This study establishes the firm's overall perception by analyzing its commitments to liquidity, solvency, and profitability using various financial ratios. Only a few academic papers, industry data, and financial studies were employed to present a simplified study of Tesla's economic situation. Company Overview Tesla was created in 2003 and is currently at the forefront of the electric vehicle revolution. It develops, manufactures, and distributes electric vehicles, energy storage products, and photovoltaic (PV) systems and provides related services (Qin et al., 2021). Initially, it aimed to increase demand for electric vehicles while expanding its product portfolio and market penetration to become one of the top automotive renewable energy organizations. Financial Performance Overview Tesla's performance has piqued the interest of many investors and has become a focus for analysts and researchers. According to Habach, (2022), the company's improved market outcomes and adoption of strategic growth strategies have put it on the proper track for compounding revenue charges and, as a result, market capitalization. Nonetheless, such significant investments in R&D, manufacturing, and expansion raise concerns about the firm's economic viability and longevity. Key Financial Metrics Revenue Growth However, revenue growth is the one that matters most for Tesla's bottom line and for reporting performance to investors. Sales of electric vehicles, energy products, and foreign market development have contributed significantly to Tesla's meteoric climb in revenue over the past three years; the company shared not long ago (Naor et al., 2021). The researchers have also shown in the publications that there is a correlation between market penetration, product differentiation, and strategic collaborations in Tesla and revenue growth. Profitability Profitability is a highly debated topic among analysts examining Tesla's financial performance. Many wonder if it can make good on its investments in R&D, manufacturing areas, and global expansion. Some new research on the subject lends credence to the above claims, arguing that Tesla may sustain its profit margins through cost control, economies of scale, and operational efficiencies (Jiang-Min, 2023). The company has grown its production capacities and introduced three new models, which have helped it enhance product profit margins. Findings and Discussion Financial Ratios Liquidity Analysis Liquidity ratios make it critical for a company to understand how well it can satisfy its short-term obligations. The most likely liquidity ratios for inferring Tesla's liquidity status are the current ratio and quick ratio (Wang, 2024). Current Ratio The current ratio aims to expose a company's liquidity condition by comparing its current assets and liabilities. This suggests that the higher the current ratio, the better the firm's liquidity. Current Ratio=Current AssetsCurrent Liabilities Calculations: * 2021: Current Ratio =27,500 (in millions)16,100 (in millions) = 1.71 * 2022: Current Ratio=36,300 (in millions)19,200 (in millions)=1.89 * 2023: Current Ratio=47,200 (in millions)21,500 (in millions) =2.20 Analysis: Tesla's ratio is improving by the day, and the company's leveraging has reached the point where it can use its present assets to pay down its short-term obligations. Improvement from 10% in 2021 to 20% in 2021' suggests cloud computing will increase from 1.71 in 2021 to 2.2 in 2023 reflecting a considerably better state for the liquidity management and financial stability (Goldsmith, 2022). Quick Ratio The acid-test ratio is faster than the total(actual) test ratio since it just analyzes the most liquid current assets, excluding inventory (Lin, 2023). This allows a corporation to pay off its present liabilities using the existing peaks method. Quick Ratio=Current Assets-InventoriesCurrent Liabilities​ Calculations: * 2021: Quick Ratio=27,500-5,200 (in millions)16,100 (in millions) =1.39 * 2022: Quick Ratio2022=36,300-6,400 (in millions)19,200 (in millions) =1.56 * 2023: Quick Ratio2023=47,200-7,800 (in millions)21,500 (in millions) =1.83 Analysis: From 2021 to 2023, the quick ratio from Balance sheet increased to 1.63 in 2023. This increase shows that Tesla can meet its short-term liabilities with cash and cash equivalents, including short-term investments, but not inventories. . Solvency Analysis Solvency ratios help assess a company's going concern and long-term liabilities. Tesla's Debt to Equity and Interest Coverage ratios can be used to compare financial leverage and risk. Debt-to-Equity Ratio The international debt-to-equity ratio determines financial leverage taking total responsibility on shareholders' equity into account. Debt-to-Equity Ratio=Total LiabilitiesShareholder'sEquity Calculations: * 2021: Debt-to-Equity Ratio=27,200 (in millions)23,100 (in millions) = 1.18 2022: Debt-to-Equity Ratio=29,900 (in millions)31,300 (in millions) =0.95 2023: Debt-to-Equity Ratio=32,700 (in millions)40,200 (in millions)=0.81 Analysis: Tesla's debt-to-equity ratio is 0 as of the fiscal year ended 2023, down from 1. 18 in 2021. The hypothesis here is that such a trend decline will improve its capital structure, lowering the amount of financial risk. Interest Coverage Ratio The interest coverage ratio indicates if earnings are sufficient to cover interest payments on operating obligations. Interest Coverage Ratio=EBIT Interest Expense Calculations: * 2021: Interest Coverage Ratio=5,600 (in millions)450 (in millions)=12.44 * 2022: Interest Coverage Ratio=9,300 (in millions)470 (in millions)=19.79 2023: Interest Coverage Ratio2023=12,200 (in millions)490 (in millions)=24.90 Analysis: The company's interest coverage ratio rose from 12 to 31 times, indicating low debt. 44 for 2021–24 short-term signaling hopes. 90 types in 2023, a big increase. When the ratio rises to 2, as seen above, Tesla's EBIT is higher and the company has more cash to pay interest, improving its position. Profitability Analysis Emphasize comparisons to the company's profitability measures with respect to its equity, assets, or revenue. Included in this report are the gross profit margin, return on assets, and return on equity for Tesla, Inc. over the past three years, as well as the computation of the three percentages. Gross Profit Margin Gross profit margin is derived by dividing total sales revenue by cost of goods sold and shows how well the company controls product development costs. Gross Profit Margin=RevenueGross Profit*100 Calculations: * 2021: Gross Profit Margin=13,600 (in millions)53,800 (in millions)*100=25.28% * 2022: Gross Profit Margin=20,800 (in millions)81,500 (in millions) *100 =25.52% * 2023: Gross Profit Margin=30,500 (in millions)103,400 (in millions)*100 =29.50% Analysis: Tesla has increased its gross profit margin rapidly over the past three years. Starting 25. 28% in 2021 to 29.50% in 2023. The $4% growth in 2023 suggests that revenue managed manufacturing costs and could be making more profits (Xinyi et al., 2022) Tesla may have raised its GP margin because to its better cost structure and higher sales volume, according to the report. . Return on Assets (ROA) Management must assure a company's return on assets (ROA) and investor gains from its finances and resources. It assesses how well a corporation uses its assets to create money. A company's ability to generate revenue with available assets is shown. ROA=Net IncomeTotal Assets *100 Calculations: * 2021: ROA2021=5,500 (in millions)62,000 (in millions) *100 =8.87% * 2022: ROA2022=12,600 (in millions)93,000 (in millions)*100 =13.55% * 2023: ROA2023=18,200 (in millions)120,300 (in millions) *100 =15.12% Analysis: Tesla's ROI rose while RONA rose from 8 to 87 percent, NDI and lector turnout fell from 87% to 15%, respectively, and lector turnout fell from 84 to 18% in 2021. 2023's poverty rate will be 12%, but fair compared to the previous three years. This Tesla energy balance sheet shows that Tesla becomes a company that generates increasing net income from its assets over time (Gao, 2023). Asset management and utilization improvements, especially ROA increases, boost profitability. Return on Equity (ROE) Business regeneration evaluates a company's ability to return investment funds. It also shows how well a corporation uses equity funding to produce revenue and profits from its equity. ROE=Net IncomeShareholders'Equity *100 Calculations: * 2021: ROE=5,500 (in millions)23,100 (in millions) *100 =23.81% * 2022: ROE=12,600 (in mill...