Tesla Financial Assessment (Essay Sample)

In this case, the selected firm, Tesla Incorporated, will be the focus of this analysis. This is a well-known electric vehicle manufacturer based in the United States of America. This company, on the other hand, is a green energy and fully electric vehicles corporation that manufactures electric automobiles, batteries and energy storage systems, solar cells, and other related goods and services. According to Mehta and Bhavani (2020), Tesla is the world's largest hybrid electric vehicle manufacturer, with a 17 percent market share and a 23 percent market share in the battery-electric segment. As a result, this report will examine various ratios to portray Tesla's financial situation.
Financial Calculations
1 Working Capital
Working capital demonstrates a company's ability to meet short-term obligations with operating capital. This figure is calculated by subtracting current liabilities from total assets. In the fourth quarter of 2021, Tesla's working capital was $9.8 billion US dollars. This demonstrates that the company is in good shape in terms of meeting its short-term obligations with current assets. This is due to a higher percentage of total assets of 24.8 billion US dollars compared to current liabilities of 14.9 billion US dollars.
2 Current Ratio
At a given point in time, the current ratio compares current assets and current liabilities. A higher current ratio is preferable because it shows an organization's ability to meet its obligations. The current ratio reported by Tesla Incorporation was 1.66:1. This implies that the company appears to have no liquidity issues.
3 Debt Ratio
The debt ratio compares or depicts total liabilities to total assets at a given point in time. A debt ratio greater than 0.60, according to Ward (2022), indicates that a company is having financial difficulties. Tesla's ratio was 0.5, which is an excellent number for a corporation because the lower the total liabilities relative to total assets, the more stable the ratio. This also means that Tesla is not in danger of going bankrupt or being liquidated.
4 Earnings Per Share
Earnings per share compare the net income of a fiscal period to the number of shares held. Tesla Motors Incorporation had a per-share rate of 0.48, indicating that ordinary stockholders profited from their investments. Tesla's increased efficiency indicates that the company is financially stable.
5 Price/Earnings Ratio
The price/earnings ratio calculates a company's worth by comparing its current share price to its earnings per share and can be used to compare the company's market value to that of another time or another company. Tesla Incorporation has a price/earnings ratio of 1453.01, indicating that it has a lot of money to make.
6 Total Asset Turnover Ratio
The total asset turnover ratio reflects the firm's ability to generate revenue from its assets and its net revenues to asset value at a given point in time. The ratio of 0.20 for Tesla Incorporation indicates that its assets are underutilized. The firm's sales are lower when compared to its total assets. Surprisingly, the company's total revenues for the fourth quarter of 2021 were 10.3 billion US dollars, while total assets were 53 billion US dollars.
7 Financial Leverage
It is the use of external financing to fund the total asset acquisition. The company has always used its excellent credit history as collateral for loans. Tesla Incorporation has a leverage ratio of 2.4, indicating that the company relies heavily on debt to generate sufficient cash. This is due to a higher percentage of total assets of 53 billion as opposed to 23 billion in equities.
8 Net Profit Margin
It compares net income to revenues generated in a given period. A higher ratio is generally preferred because it indicates that the company is financially sound. According to the analysis, Tesla Plc. has a ratio of 4.47%, indicating that it is performing well in the market.
9 Return on Assets
In this ratio, Tesla's operating income is compared to its asset value, and the company achieved a return on assets ratio of 0.88 percent in 2021. Given the difficulties that the majority of businesses have faced as a result of the coronavirus disease outbreak, this is appealing.
10 Return on Equity
In this comparison, the company's net income is compared to total stockholders' equity.