Accounting Question

Competencies

In this project, you will demonstrate your mastery of the following competencies:

• Apply tools and techniques for reporting financial statement valuation and projections
• Determine organizational health using economic, industry, and financial analyses
• Communicate business analyses and valuation reports to inform business decisions

Overview

Accounting professionals are often asked to provide financial statement analysis for a variety of reasons and audiences. Internally, such evaluations of a company’s health and value may be used to inform decisions regarding redeployment of assets or improved operational performance. Externally, they may be used in making credit or investment decisions.

You will have the opportunity to evaluate the overall health of the company and its future prospects. Keep in mind when preparing valuation reports, you will more than likely be working on a team. You will need to gather the necessary information that has been assigned to you and report your findings to the rest of the team to determine whether to invest in the company or not at this time.

Directions

Complete the following in the same files—Project Workbook Template and

Business Valuation Template

—that include your original work from all the milestones.

Note: You may choose to complete an assignment using a desktop program instead of SNHU’s virtual desktop (VDI); however, technical support will not be provided by SNHU if you select this option.

You will prepare projected financial statements and cash flows for five years for the same company you have been researching throughout the milestones. Any discounts appropriate from the research should be included in the valuation as identified below. Once you have gathered all the information, you will prepare a professional report for your team.

For the final valuation calculation, you will be estimating your selected company’s value by using an earnings-based approach, specifically the discounted cash flow model. You will be applying all applicable discounts to arrive at a final indication of value.

You will have an opportunity to correct your answers from Milestone Two in the Project Workbook Template on the corrected tabs based on the feedback from your instructor.

Specifically, you must address the following rubric criteria:

Project Workbook Template

Forecast income statements of the company for the next five years on the Prospective

Analysis

tab. Use the historical statements as a guide with your external research on the company and the industry. Include the following details in your response:Forecast the annual revenue growth rate percentage each year over the next five years.Forecast the annual gross profit margin as a percentage that you expect to see over the next five years.Forecast the selling, general, and administrative (SG&A) expenses as a percentage of revenue over the next five years.Forecast your company’s future interest expense each year for the next five years.Forecast any additional other income (expense) as determined is necessary.

Note: If you received a perfect score for Milestone Two, you do not need to correct any errors. Simply note it in the designated section within the workbook. You will receive full points for this rubric criterion.

Business Valuation Template

Assumptions and Rationale

1. Explain all assumptions used in the forecast and your rationale. Include the following details in your response:Explain assumptions for the Prospective Analysis tab (revenue growth rate, gross profit margin, SG&A expenses, interest expense).Explain assumptions for the DCF tab (depreciation added back, capital expenditures, and debt reduction).Explain assumptions for the Valuation Summary tab.
2. Explain all discounts that are used in the valuation process and how they are derived. Include the following details in your response:Include current discount rate.Include discount for lack of marketability (DLOM) and discount for lack of control (DLOC).Provide your rationale if you changed the given discount rates.
3. Provide evidence in your write up that all supported assumptions are related to research.
4. Determine if the metrics have any correlation with the company performance. Include the following details in your response:Explain if the turnover rates relate to the company.Explain if the advancement rates relate to the company.Explain if the diversity representation rates relate to the company.
5. Summarize the micro and macroeconomic factors that impact your industry.
6. Identify historical global and/or domestic major event(s) and relate it back to historical financial company health changes. Global and/or domestic events include significant natural disasters, global conflicts, and/or health crises. Consider the following questions to guide your response:What was the financial health of the company before global and/or domestic major events?What was the financial health of the company during global and/or domestic major events?What was the financial health of the company after global and/or domestic major events?
7. Explain changes in consumer behavior patterns due to historical global and/or domestic major event(s) that may impact your company’s projections.

Analysis

1. Explain the difference between the current market price and the final valuation. Include the following details in your response:Provide today’s market price of the stock for the company.Provide a rationale.
2. Explain financial qualitative information in regulatory filings. Include the following details in your response:Comment on any potential earnings management happening in the financial statements.Comment on any other potential fraudulent activity.
3. Explain how historical global and/or domestic major event(s) in the industry may impact the company into the future. Consider the following questions to guide your response:Was there a major shift with technology advances?Did a competitor make a huge shift in its products or services offered?

Business

Valuation Team Report

1. Create visualizations to show findings that are relevant to the valuation team.
2. Create a professional report for the valuation team that is easy to follow and clearly documents how you arrived at your final valuation along with your recommendation. Include the following detail in your response:Include the metrics on how you projected the company’s revenue profit margins and cash flow.Include a cover page.Include all key elements (executive summary, company overview, economic and industry trends, financial analysis, valuation approaches and methods used, discounts and other considerations, and appraisal conclusion).Include your recommendation on investing in the company at this time.

If you need writing support, access the Academic Support module of your course.

What to Submit

To complete this project, you must submit the following:

Completed Project Workbook Template

Submit the same file submitted for Milestone Two with your instructor feedback and the following tabs completed: Corrected Balance Sheet, Corrected Income Statement, Corrected Ratios, Prospective Analysis, DCF, Valuation Summary.

Completed Business Valuation Template

Submit the same file submitted for Milestone One, Milestone Two, and Milestone Three with the Project section completed of the Business Valuation Template. The Project section should be 4- to 6-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins within the completed template. Sources should be cited according to APA style.

Valuation Team Report

Submit a 4- to 6-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins that includes visualizations to support your findings. Sources should be cited according to APA style

ACC 345 Milestone One
Basel Sukkar
Southern New Hampshire University
ACC 345: Financial Statement Analysis/Business Valuation
Jamie Zimmerman
Jan 12th, 2024
Milestone One: Introduction …………………………………………………………………………………………….. 3
Links ………………………………………………………………………………………………………………………….. 3
History and Overview ………………………………………………………………………………………………….. 3
Summary ……………………………………………………………………………………………………………………. 7
Milestone One References ……………………………………………………………………………………………. 9
Milestone Two: Financial Analysis …………………………………………………………………………………… 9
Balance Sheet Analysis ………………………………………………………………………………………………… 9
Income Statement and Cash Flow Analysis …………………………………………………………………… 10
Normalization Adjustments Analysis …………………………………………………………………………… 12
Summary ………………………………………………………………………………………………………………….. 12
Milestone Two References ………………………………………………………………………………………….. 12
Milestone Three: Economic Outlook ……………………………………………………………………………….. 13
Microeconomic Industry Analysis ……………………………………………………………………………….. 13
General Macroeconomic Analysis ……………………………………………………………………………….. 14
Summary ………………………………………………………………………………………………………………….. 15
Milestone Three References ………………………………………………………………………………………… 15
Project …………………………………………………………………………………………………………………………. 16
Assumptions and Rationale …………………………………………………………………………………………. 16
Analysis ……………………………………………………………………………………………………………………. 16
Project References ……………………………………………………………………………………………………… 16
Valuation Team Report ………………………………………………………………………………………………. 16
Milestone One: Introduction
Links
1. Provide the most recent SEC Form 10-K Filing link for the company.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000095017023001409/tsla20221231.htm
2. Provide the most recent SEC Proxy Filing link for the company.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000119312523094075/d4513
42ddef14a.htm
History and Overview
1. Provide a brief company history overview based on external research of the company.
Consider the following questions to guide your response:
A. How long has the company been in business?
B. Who was the original founder of the company?
C. What significant changes to company leadership have occurred?
D. How has the company changed since its beginning? Consider expansion of
locations or products/services, etc.
The company chosen is Tesla inc, and it has been in business for 20 years. The
founders of Tesla are Elon Musk, Martin Eberhard, JB Straubel, Marc Trapenning, Ian
Wright who originally founded the company. One of the major changes that Tesla has
experienced during its years in business was and still is the impact that the current CEO
Elon Musk has had on the company’s progress and success,through his focus on electrical
vehicles and strong social media influence, Elon Musk was able to lift the company to it’s
highest potential yet. e company has been mainly producing Electrical vehicles varying
from sedans, SUVs, and trucks which shaped the direction of the company as a mainly
EV car manufacturer.
2. Identify all of the company’s major locations for their facilities and/or other properties.
Tesla has many stores locations and manufacturing facilities, and the most employed
facility is a Tesla factory in Fremont, California where the electrical vehicles are produced, then
the Gigafactory in Nevada where the batteries are produced. In addition, there are four more
giga factories to accommodate global production.
3. Identify all of the customers recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business.
Based on the 10-K filing, Tesla’s customers consist of people seeking an
electrical vehicle, also certain entities and organizations are in partnerships with Tesla
such as government entities, freight services given the new Tesla freight truck.
4. List all of the names of the executive management team of the company.
Find this information in the annual Form 10-K filing, in Part 3, Item 10:
Directors, Executive Officers and Corporate Governance or in the Annual Proxy filing,
under “Executive Officers,” or “Officers Compensation.” You may copy and paste a
chart into this section from the annual Form 10-K filing. Be sure to add your own
explanation of the information in the chart along with an attribution and a citation in the
References section at the bottom of this template.
Name
Position
Elon Musk
Technoking of Tesla and Chief
Executive Officer
Zachary Kirkhorn
Master of Coin and Chief Financial
Officer
Andrew Baglino
Senior Vice President, Powertrain
and Energy Engineering
Tesla executive team consists of the CEO Elon Musk, the CFO Zachary Kirkhorn, and the Sr.
Vice President Andrew Baglino.
5. Identify all of the competition recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business.
Tesla’s competition is huge as it’s part of the automotive industry, shifting
towards electrical vehicle production, which will only increase in the upcoming years.
Another side of Tesla’s competition comes from the energy storage and solar energy
systems sector.
6. Identify all of the major shareholders of the company.
Find this information in the Annual Proxy filing, under “Beneficial Ownership.”
Tesla’s shareholders consist of a majority shareholding by Tesla’s CEO Elon
Musk, with a shareholding of 20.6% beneficially owned and the same goes to the
company’s CFO Zachary Kirkhorn. Other shareholders such as The Vanguard Group
have a 6.9% shareholding, Blackrock, inc. With a 5.6% shareholding.
7. Describe business risks recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1A: Risk Factors.
Item 1A in the annual Form 10-K will be lengthy. Do your best to summarize the risks
the company has identified.
Business risks facing Tesla are mostly related to production, supply, competition, and
constant change in regulations. 
8. Explain how the company is committed to Environmental, Social and Governance (ESG)
efforts and sustainability.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business or in
Part 2, Item 7: Management’s Discussion and Analysis of Financial Condition and
Results of Operations. If your company does not provide this information in its SEC
filings, you will need to do external research to determine your company’s commitment
to ESG efforts and sustainability. Be sure to add your own explanation of the information
you researched. Include appropriate attributions in your explanation and a citation in the
References section at the bottom of this template.
Tesla’s commitment to environmental, Social, and Governance (ESG) is demonstrated
through their products which promote sustainability and focus on renewal energy, also their
electrical vehicles have been proven to reduce Carbon emmisions. In addition to their solar
energy systems.
9. Describe the company’s Leadership in Energy and Environmental Design (LEED) status.
Consider the following questions to guide your response:
A. Is the company currently LEED certified?
B. If the company is not currently LEED certificated, is it working towards
becoming LEED certified?
Review the Form 10-K filing to see if your company is LEED certified or if it discusses
its certifications. If your company does not provide this information in its SEC Filings,
you will need to do external research to determine your company’s LEED status. Be sure
to add your own explanation of the information you researched. Include appropriate
attributions in your explanation and a citation in the References section at the bottom of
this template.
Tesla has taken substantial initiatives to gain its recognition for energy and
environmental design, known as LEED status. While the specific LEED certifications for
Tesla’s facilities may vary, the company prioritizes sustainability across all its operations.
One of Tesla’s illustrations of LEED is in Tesla’s Gigafactories, where sustainable
designs and the integration of renewable energy sources are prioritized, and that is
apparent as the Tesla Gigafactory located in Nevada has been awarded the LEED Gold
certification, presenting the company’s dedication to environmentally conscious practices.
Summary
1. Summarize your findings for the valuation team. Include the following details in your
response:
A. Explain what you learned as you researched the company.
B. Identify the key points the valuation team needs to be aware of.
Tesla, which has been around for two decades, has gone through some big changes,
especially because of CEO Elon Musk’s focus on electric vehicles (EVs) and his strong presence
on social media, which has boosted the company. They’re all about EVs, and they’ve got various
stores and factories. The one in Fremont, California, is where they make most of EVs, and the
Gigafactory in Nevada handles the batteries. They’re facing competition in both EVs and energy
storage and solar systems sectors.
Tesla’s customers include regular consumers looking for EVs and some partnerships with
government agencies and freight services. At the top, you’ve got Elon Musk, Zachary Kirkhorn
as the CFO, and Andrew Baglino as Sr. Vice President. Shareholders, mainly Musk and
Kirkhorn, also include big names like The Vanguard Group and BlackRock.
Tesla has got some risks like production issues, supply chain stuff, tough competition,
and changes in regulations. They’re all about being environmentally friendly and socially
responsible, with a focus on renewable energy and cutting down on carbon emissions. They’re
even going for LEED status for their facilities, with the Gigafactory in Nevada getting the LEED
Gold certification, showing they’re serious about being environmentally conscious.
2. Create at least one effective visualization that supports key points. Include the following
detail in your response:
A. Appropriate labels for the visualization(s).
Create an effective visualization(s) based on your research to support your summary
report. Examples of ideas for your visualization(s) include creating a timeline of the
company history, creating a map of the company’s locations, creating a chart of major
shareholders showing ownership and broken down by percentages, etc.
Milestone One References
Team, T.I. (no date) Who are tesla’s (TSLA) main competitors?, Investopedia. Available at:
https://www.investopedia.com/ask/answers/120314/who-are-teslas-tsla-main-competitors.asp#tocthe-bottom-line (Accessed: 14 January 2024).
Cadie Thompson, K.L. (no date) Tesla history’s most important moments, from its founders’ launch to
bringing EVS mainstream, Business Insider. Available at: https://www.businessinsider.com/teslahistory-founders#2009-5 (Accessed: 14 January 2024).
Milestone Two: Financial Analysis
Balance Sheet Analysis
1. Explain the findings regarding the company’s asset accounts for the previous five years.
Include the following details in your response:
A. Describe in detail the material changes in the asset accounts, including changes in
cash, AR, inventory, property, plant and equipment, and goodwill.
B. Explain what these changes might be related to.
[Insert text.]
2. Explain the findings regarding the company’s liability accounts for the previous five
years. Include the following details in your response:
A. Describe in detail the material changes in both current and long-term liabilities.
B. Explain what these changes might be related to.
[Insert text.]
3. Explain the findings regarding the company’s equity accounts for the previous five years.
Include the following details in your response:
A. Describe in detail the changes to equity accounts, including common stock,
treasury stock, or additional paid in capital (i.e., whether the company raised
funds or retired stock).
B. Explain how the changes compare to the net income or other sections of the
balance sheet.
C. Identify whether the company is paying out dividends.
D. Describe in detail how that the company’s dividend payouts have changed over
the past five years.
E. Describe in detail the changes in “total equity” (representing the current “book
value” of the company).
[Insert text.]
4. Explain what the company’s current and prior year liquidity and debt-to-equity ratios say
about the company’s financial health. Consider the following questions to guide your
response:
A. What is an appropriate level of debt?
B. How does this year’s performance compare to the previous year?
[Insert text.]
Income Statement and Cash Flow Analysis
1. Explain the profitability ratios that are included in the company’s financial statements.
Include the following detail in your response:
A. Explain any trends and relate any changes back to the balance sheet and income
statement accounts used in the ratio calculation.
Use appropriate profitability ratio(s) and a vertical analysis (using the common-size
analysis in the Project Workbook Template).
.
[Insert text.]
2. Explain the profitability of the company for the prior and current years. Consider the
following questions to guide your response:
A. What does a vertical analysis of the company’s gross revenue show you? What is
the percentage (%) of change year over year for these past five years?
B. How are the company’s COGS and gross profit margin being managed?
C. How are the company’s sales, general, and administrative expenses being
managed as a percentage of sales? What does this tell you about the company’s
current business cycle? Remember, it is normal for this percentage to rise when
sales are dropping and fall when sales are rising. If this is not happening, what
might be the reason?
Use appropriate profitability ratio(s) and a vertical analysis (using the common-size
analysis in the Project Workbook Template).
[Insert text.]
3. Describe what free cash flow is and how it is calculated.
[Insert text.]
4. Explain the free cash flow history for the company.
Search the company’s most recent 10-K filing first for a discussion from management on
their free cash flow. If there isn’t anything in the filing, do an internet search for the
company’s free cash flow history.
[Insert text.]
5. Explain the data reported in the cash flow statement for all five years reported. Include
the following details in your response:
A. Identify the amount of cash flow reported from operations.
B. Identify the amount of cash flow reported from investments.
C. Identify the amount of cash flow reported from financing.
D. Explain the correlation between each of these categories of cash flow for the past
five years.
[Insert text.]
Normalization Adjustments Analysis
1. Define the term normalization adjustment.
[Insert text.]
2. Identify three examples of balance sheet normalization adjustments that might appear.
[Insert text.]
3. Identify three examples of income statement normalization adjustments that might
appear.
[Insert text.]
Summary
1. Summarize your findings for the valuation team. Include the following details in your
response:
A. Explain what you learned as you researched the company.
B. Identify the key points the valuation team needs to be aware of.
Use the common-size analysis in the Project Workbook Template to inform your
summary. Include key identifiers from your research in your summary.
[Insert text.]
2. Create at least one effective visualization that supports key points. Include the following
detail in your response:
A. Appropriate labels for the visualization(s).
Examples of ideas for your visualization(s) include a line chart showing sales growth and
gross profit margin and other expenses or a graph of the ratio analysis data.
[Insert visualization(s).]
Milestone Two References
[Insert text.]
Milestone Three: Economic Outlook
Microeconomic Industry Analysis
1. Explain the industry outlook for the company. Include the following details in your
response:
A. Identify the primary industry the company operates in.
B. Provide a general overview of the size of the industry both domestically and
internationally.
C. Explain current industry trends and emerging technologies that might impact the
company’s industry in the future.
[Insert text.]
2. Explain how the supply and demand for the company’s industry may affect consumer
behavior. Include the following details in your response:
A. Explain major events have impacted supply and demand for the company’s
industry.
B. Identify if there have been any supply chain issues. If so, explain how these issues
have affected overall supply and demand.
[Insert text.]
3. Evaluate the competitive landscape for the company. Include the following details in
your response:
A. List the company’s current percentage of the market share in this industry.
B. List the company’s top three competitors and what percentage of the market share
each competitor holds.
C. Explain how the percentage of market share changed over the last three years for
the company and its competitors.
D. Explain the new competitors entering this industry.
[Insert text.]
4. Identify key data from the SWOT analysis for the company and its primary competitor.
Include the following details to your response:
A. Provide the citation for SWOT analysis from a reputable source for the company.
B. Provide the citation for SWOT analysis from a reputable source for the
company’s primary competitor.
C. Identify the company’s major strengths and weaknesses compared to the
company’s primary competitor.
[Insert text.]
5. Evaluate the impact of new or recently changed regulations specific to the company’s
industry. Include the following details in your response:
A. Provide a citation to the specific new regulation.
B. Explain the advantages and/or disadvantages of the new regulation(s) for the
company’s industry.
[Insert text.]
6. Identify potential international issues with the company expanding into global markets.
Consider the following questions to guide your response:
A. What historical data may affect the company as it expands?
B. What potential future issues may arise based on current economic conditions?
Search the company’s most recent 10-K filing first for information on protentional
international issues. Search in Part 2, Item 7: Management’s Discussion and Analysis of
Financial Condition and Results of Operations. If there isn’t anything in the filing, do an
internet search for news stories and/or issues regarding the company’s experience with
expanding into global markets.
[Insert text.]
7. Describe labor market trends in the company’s industry.
[Insert text.]
8. Explain how labor market trends might impact the company’s operations.
[Insert text.]
General Macroeconomic Analysis
1. Explain macroeconomic trends that might impact the company and/or its industry now or
in the future. Consider the following questions to guide your response:
A. How could economic output and consumption trends impact the company and/or
its industry?
B. How have interest rate changes impacted the company?
C. How might the current Gross Domestic Product (GDP) and its projected future
movement impact the company’s future operations?
[Insert text.]
2. Identify changes in monetary policy trends that impacted the domestic and/or global
economy the company’s operates in.
[Insert text.]
3. Explain how monetary policy changes have affected the company and/or its industry.
[Insert text.]
4. Identify changes in trade policy trends that impacted the domestic and/or global economy
the company operates in.
[Insert text.]
5. Explain how trade policy changes have affected the company and/or its industry.
[Insert text.]
Summary
1. Summarize your findings for the valuation team. Include the following details in your
response:
A. Explain what you learned as you researched the external factors for the company.
B. Identify the key points the valuation team needs to be aware of.
[Insert text.]
2. Create at least one effective visualization that supports key points. Include the following
detail in your response:
A. Appropriate labels for the visualization(s).
Create an effective visualization(s) based on your research to support your summary
report. Examples of ideas for your visualization(s) include a graph showing any of the
key economic indicators over the past five years, showing changes in market share of key
competitors over the past 3-5 years, or showing the industry outlook projections.
[Insert visualization(s).]
Milestone Three References
[Insert text.]
Project
Assumptions and Rationale
Address rubric criteria 1-7 in this section.
[Insert text.]
Analysis
Address rubric criteria 8-10 in this section.
[Insert text.]
Project References
[Insert text.]
Valuation Team Report
This Valuation Team Report will be submitted separately. Refer to the Project Guidelines and
Rubric for submission guidelines.
ACC 345 Milestone Two
Basel Sukkar
Southern New Hampshire University
ACC 345: Financial Statement Analysis/Business Valuation
Jamie Zimmerman
Jan 28th, 2024
Milestone One: Introduction …………………………………………………………………………………………….. 3
Links ………………………………………………………………………………………………………………………….. 3
History and Overview ………………………………………………………………………………………………….. 3
Summary ……………………………………………………………………………………………………………………. 6
Milestone One References ……………………………………………………………………………………………. 7
Milestone Two: Financial Analysis …………………………………………………………………………………… 8
Balance Sheet Analysis ………………………………………………………………………………………………… 8
Income Statement and Cash Flow Analysis …………………………………………………………………… 11
Normalization Adjustments Analysis …………………………………………………………………………… 14
Summary ………………………………………………………………………………………………………………….. 15
Milestone Two References ………………………………………………………………………………………….. 16
Milestone Three: Economic Outlook ……………………………………………………………………………….. 17
Microeconomic Industry Analysis ……………………………………………………………………………….. 17
General Macroeconomic Analysis ……………………………………………………………………………….. 18
Summary ………………………………………………………………………………………………………………….. 19
Milestone Three References ………………………………………………………………………………………… 19
Project …………………………………………………………………………………………………………………………. 19
Assumptions and Rationale …………………………………………………………………………………………. 19
Analysis ……………………………………………………………………………………………………………………. 20
Project References ……………………………………………………………………………………………………… 20
Valuation Team Report ………………………………………………………………………………………………. 20
Milestone One: Introduction
Links
1. Provide the most recent SEC Form 10-K Filing link for the company.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000095017023001409/tsla20221231.htm
2. Provide the most recent SEC Proxy Filing link for the company.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000119312523094075/d4513
42ddef14a.htm
History and Overview
1. Provide a brief company history overview based on external research of the company.
Consider the following questions to guide your response:
A. How long has the company been in business?
B. Who was the original founder of the company?
C. What significant changes to company leadership have occurred?
D. How has the company changed since its beginning? Consider expansion of
locations or products/services, etc.
The company chosen is Tesla inc, and it has been in business for 20 years. The
founders of Tesla are Elon Musk, Martin Eberhard, JB Straubel, Marc Trapenning, Ian
Wright who originally founded the company. One of the major changes that Tesla has
experienced during its years in business was and still is the impact that the current CEO
Elon Musk has had on the company’s progress and success,through his focus on electrical
vehicles and strong social media influence, Elon Musk was able to lift the company to it’s
highest potential yet. e company has been mainly producing Electrical vehicles varying
from sedans, SUVs, and trucks which shaped the direction of the company as a mainly
EV car manufacturer.
2. Identify all of the company’s major locations for their facilities and/or other properties.
Tesla has many stores locations and manufacturing facilities, and the most employed
facility is a Tesla factory in Fremont, California where the electrical vehicles are produced, then
the Gigafactory in Nevada where the batteries are produced. In addition, there are four more
giga factories to accommodate global production.
3. Identify all of the customers recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business.
Based on the 10-K filing, Tesla’s customers consist of people seeking an
electrical vehicle, also certain entities and organizations are in partnerships with Tesla
such as government entities, freight services given the new Tesla freight truck.
4. List all of the names of the executive management team of the company.
Find this information in the annual Form 10-K filing, in Part 3, Item 10:
Directors, Executive Officers and Corporate Governance or in the Annual Proxy filing,
under “Executive Officers,” or “Officers Compensation.” You may copy and paste a
chart into this section from the annual Form 10-K filing. Be sure to add your own
explanation of the information in the chart along with an attribution and a citation in the
References section at the bottom of this template.
Name
Position
Elon Musk
Technoking of Tesla and
Chief Executive Officer
Zachary Kirkhorn
Master of Coin and Chief
Financial Officer
Andrew Baglino
Senior Vice President,
Powertrain and Energy
Engineering
Tesla executive team consists of the CEO Elon Musk, the CFO Zachary Kirkhorn, and the Sr.
Vice President Andrew Baglino.
5. Identify all of the competition recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business.
Tesla’s competition is huge as it’s part of the automotive industry, shifting
towards electrical vehicle production, which will only increase in the upcoming years.
Another side of Tesla’s competition comes from the energy storage and solar energy
systems sector.
6. Identify all of the major shareholders of the company.
Find this information in the Annual Proxy filing, under “Beneficial Ownership.”
Tesla’s shareholders consist of a majority shareholding by Tesla’s CEO Elon
Musk, with a shareholding of 20.6% beneficially owned and the same goes to the
company’s CFO Zachary Kirkhorn. Other shareholders such as The Vanguard Group
have a 6.9% shareholding, Blackrock, inc. With a 5.6% shareholding.
7. Describe business risks recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1A: Risk Factors.
Item 1A in the annual Form 10-K will be lengthy. Do your best to summarize the risks
the company has identified.
Business risks facing Tesla are mostly related to production, supply, competition, and
constant change in regulations. 
8. Explain how the company is committed to Environmental, Social and Governance (ESG)
efforts and sustainability.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business or in
Part 2, Item 7: Management’s Discussion and Analysis of Financial Condition and
Results of Operations. If your company does not provide this information in its SEC
filings, you will need to do external research to determine your company’s commitment
to ESG efforts and sustainability. Be sure to add your own explanation of the information
you researched. Include appropriate attributions in your explanation and a citation in the
References section at the bottom of this template.
Tesla’s commitment to environmental, Social, and Governance (ESG) is demonstrated
through their products which promote sustainability and focus on renewal energy, also their
electrical vehicles have been proven to reduce Carbon emmisions. In addition to their solar
energy systems.
9. Describe the company’s Leadership in Energy and Environmental Design (LEED) status.
Consider the following questions to guide your response:
A. Is the company currently LEED certified?
B. If the company is not currently LEED certificated, is it working towards
becoming LEED certified?
Review the Form 10-K filing to see if your company is LEED certified or if it discusses
its certifications. If your company does not provide this information in its SEC Filings,
you will need to do external research to determine your company’s LEED status. Be sure
to add your own explanation of the information you researched. Include appropriate
attributions in your explanation and a citation in the References section at the bottom of
this template.
Tesla has taken substantial initiatives to gain its recognition for energy and
environmental design, known as LEED status. While the specific LEED certifications for
Tesla’s facilities may vary, the company prioritizes sustainability across all its operations.
One of Tesla’s illustrations of LEED is in Tesla’s Gigafactories, where sustainable
designs and the integration of renewable energy sources are prioritized, and that is
apparent as the Tesla Gigafactory located in Nevada has been awarded the LEED Gold
certification, presenting the company’s dedication to environmentally conscious practices.
Summary
1. Summarize your findings for the valuation team. Include the following details in your
response:
A. Explain what you learned as you researched the company.
B. Identify the key points the valuation team needs to be aware of.
Tesla, which has been around for two decades, has gone through some big changes,
especially because of CEO Elon Musk’s focus on electric vehicles (EVs) and his strong presence
on social media, which has boosted the company. They’re all about EVs, and they’ve got various
stores and factories. The one in Fremont, California, is where they make most of EVs, and the
Gigafactory in Nevada handles the batteries. They’re facing competition in both EVs and energy
storage and solar systems sectors.
Tesla’s customers include regular consumers looking for EVs and some partnerships with
government agencies and freight services. At the top, you’ve got Elon Musk, Zachary Kirkhorn
as the CFO, and Andrew Baglino as Sr. Vice President. Shareholders, mainly Musk and
Kirkhorn, also include big names like The Vanguard Group and BlackRock.
Tesla has got some risks like production issues, supply chain stuff, tough competition,
and changes in regulations. They’re all about being environmentally friendly and socially
responsible, with a focus on renewable energy and cutting down on carbon emissions. They’re
even going for LEED status for their facilities, with the Gigafactory in Nevada getting the LEED
Gold certification, showing they’re serious about being environmentally conscious.
2. Create at least one effective visualization that supports key points. Include the following
detail in your response:
A. Appropriate labels for the visualization(s).
Create an effective visualization(s) based on your research to support your summary
report. Examples of ideas for your visualization(s) include creating a timeline of the
company history, creating a map of the company’s locations, creating a chart of major
shareholders showing ownership and broken down by percentages, etc.
Milestone One References
Team, T.I. (no date) Who are tesla’s (TSLA) main competitors?, Investopedia. Available at:
https://www.investopedia.com/ask/answers/120314/who-are-teslas-tsla-maincompetitors.asp#toc-the-bottom-line (Accessed: 14 January 2024).
Cadie Thompson, K.L. (no date) Tesla history’s most important moments, from its founders’
launch to bringing EVS mainstream, Business Insider. Available at:
https://www.businessinsider.com/tesla-history-founders#2009-5 (Accessed: 14 January
2024).
Milestone Two: Financial Analysis
Balance Sheet Analysis
1. Explain the findings regarding the company’s asset accounts for the previous five years.
Include the following details in your response:
A. Describe in detail the material changes in the asset accounts, including changes in
cash, AR, inventory, property, plant and equipment, and goodwill.
B. Explain what these changes might be related to.
Tesla had a significant improvement in its asset accumulation between 2018 and 2022. The
asset accounts increased their net worth steadily throughout the period. The cash and cash
equivalents increased from $3686 to $17576 in 2021 but fell to 16253 in 2022. The fall was less
significant, considering the previous years had seen a marginal rise in cash. The accounts
receivables increased from 2018 to 2019, but there was a significant fall in 2020 and 2021 (SEC,
2022). This fall was presumably caused by a lack of cash on hand during the COVID pandemic
when restrictions on the movement of people were put in place. The A/R, however, rose by
4.69% in 2022. The inventory fell between 2018 and 2021 but rose in 2022. The fall in the
inventory shows Tesla has weak sales, which is considered overstocking, mostly likely due to the
effects of COVID on the economy. The property, plant, equipment, and goodwill have had a
steady fall throughout the five years. The fall in these assets shows a diminishing value of assets
over time. This fall is mainly caused by physical and economic depreciation.
2. Explain the findings regarding the company’s liability accounts for the previous five
years. Include the following details in your response:
A. Describe in detail the material changes in both current and long-term liabilities.
B. Explain what these changes might be related to.
The current liabilities fall from 2018 to 2020 but significantly rise in 2021. The fall was
again observed in 2022, where current liabilities fell from 49.76% in 2021 to 29.66% in 2022.
The total long-term liabilities fell from 59.68% to 11.01% in the five years, while the total
liabilities fell from 99.42% to 40.67%. The current liabilities were higher and did not have a
steady trend because they would rise for a year and fall before rising again. This indicates that
Tesla did not have an effective plan for using its current assets and short-term liabilities.
However, long-term and total long-term liabilities fell significantly within the five years,
showing Tesla was in a position to service its loans.
3. Explain the findings regarding the company’s equity accounts for the previous five years.
Include the following details in your response:
A. Describe in detail the changes to equity accounts, including common stock,
treasury stock, or additional paid in capital (i.e., whether the company raised
funds or retired stock).
B. Explain how the changes compare to the net income or other sections of the
balance sheet.
C. Identify whether the company is paying out dividends.
D. Describe in detail how that the company’s dividend payouts have changed over
the past five years.
E. Describe in detail the changes in “total equity” (representing the current “book
value” of the company).
Tesla’s common stock was at 0% and rose once in 2021 to 0.01% before returning to 0% in
2022. The additional paid-in capital rose from 50.49% in 2018 to 65.98% in 2020, falling to
51.12% in 2022. Between 2019 and 2021, the returned earnings and other equity remained below
1%. However, the entire equity ranged between 27.23% and 71.03%, a continuous improvement
to 2022 (SEC, 2022). The balance sheet had a low retained earnings record, indicating that the
company had profitable operations. However, the negative records show that Tesla’s dividend
distributions exceeded its net income. Tesla was, therefore, making some losses between 2018
and 2022.
The fact that Tesla had negative retained earnings ranging from -25.02% in 2019 to -0.57%
shows it was not paying dividends. The shareholders also experience the loss. There was no
payment of dividends between 2018 and 2022 since there were minimal retained earnings. The
liabilities would exceed the assets, so the owner’s equity was significantly low (SEC, 2022).
Between 2019 and 2020, there was a notable rise in total equity from 27.23% to 53.80%,
indicating a noteworthy expansion in the overall worth of the business. Between 2020 and 2022,
there was a further increase in total equity, which implied continued positive performance.
Tesla’s successful product innovations, increased market share, and operational efficiency could
have influenced these changes.
4. Explain what the company’s current and prior year liquidity and debt-to-equity ratios say
about the company’s financial health. Consider the following questions to guide your
response:
A. What is an appropriate level of debt?
B. How does this year’s performance compare to the previous year?
The current ratio of Tesla in 2022 was 1.87, which increased from 1.20 in 2021. The
quick and working capital ratios were 1.03 and $16316 in 2022, increasing from 0.86 and $4406,
respectively. These ratios were within the recommended range of 1 to 1.5, except for the quick
ratio in 2021, which was below 1. The debt-to-equity ratio above 1.0 shows that the company
was conducting investments with slight risk in 2022. In 2021, the company was conducting less
risky business, insinuating that there could be low organizational operations and resource
utilization.
Income Statement and Cash Flow Analysis
1. Explain the profitability ratios that are included in the company’s financial statements.
Include the following detail in your response:
A. Explain any trends and relate any changes back to the balance sheet and income
statement accounts used in the ratio calculation.
Use appropriate profitability ratio(s) and a vertical analysis (using the common-size
analysis in the Project Workbook Template).
The equity return substantially rose continuously from 3.63% in 2018 to 37.30% in 2022.
The significant rise was between 2020 and 2021 when the ratio rose from 11.77% to 29.33%.
The return on total assets rose from 2.79% to 26.49% between 2018 and 2022, with the
significant rise being 6.33% to 18.35% between 2020 and 2021 (SEC, 2022). The net profit on
revenues rose from 2.64% in 2018 to 20.47% in 2022, and again, the significant rise was
between 2020 and 2021 when the ratio rose from 8.29% to 16.45%. The rise of these ratios can
be traced back to the balance sheet, where the total equity rose significantly from $6618 to
$44704 between 2019 and 2022. The ratios change can also be traced in the income statement,
where the net income rose steadily over the five years.
2. Explain the profitability of the company for the prior and current years. Consider the
following questions to guide your response:
A. What does a vertical analysis of the company’s gross revenue show you? What is
the percentage (%) of change year over year for these past five years?
B. How are the company’s COGS and gross profit margin being managed?
C. How are the company’s sales, general, and administrative expenses being
managed as a percentage of sales? What does this tell you about the company’s
current business cycle? Remember, it is normal for this percentage to rise when
sales are dropping and fall when sales are rising. If this is not happening, what
might be the reason?
Use appropriate profitability ratio(s) and a vertical analysis (using the common-size
analysis in the Project Workbook Template).
Tesla’s gross profit has been consistent since 2018. The company had 25.60% gross profit
in 2022, an increase from 25.28% in 2021 (SEC, 2022). The 2018, 2019, and 2020 gross profits
were 18.83%, 16.56%, and 21.02%, respectively. The cost of goods reduced steadily from
81.17% to 74.40%, although Tesla had seen a slight increase to 83.44% in 2019. Tesla manages
the cost of goods sold and the gross profit margin by enhancing operational efficiency. This is
indicated by the increased sales and inventory that have been reduced in recent years.
The pattern of sales, general, and administrative expenses spending as a proportion of sales
dropping suggests that sales, general, and administrative expenses are being adequately
controlled. Similar calculations may be used to get the sales, general, and administrative
expenses percentages changed over the previous year, and the COGS percentages changed.
Overall, the decline in sales and general and administrative expenses as a proportion of sales is
favorable, demonstrating effective control of operational costs relative to sales (Rounaghi et al.,
2021). The corporation may successfully limit costs if the percentage of sales, general, and
administrative expenses is dropping. However, it is essential to consider the whole cost of these
expenses and how they affect business operations. The corporation may be effectively
controlling its revenue expenditures if there is a downward trend in sales, general, and
administrative expenses as a proportion of sales (Rounaghi et al., 2021). Sales, general, and
administrative costs are often expected to increase during declining sales and decrease during
periods of growing sales. If this is not occurring, it can be because alternative strategic choices or
efficient cost control were made.
3. Describe what free cash flow is and how it is calculated.
Free cash flow is the amount of money remaining after the company has compensated its
operational supporters and paid for capital expenditures. The free cash flow measures the
profitability, excluding noncash expenses recorded in the income statement (Oded, 2020).
Instead, the free cash flow includes the spending on equipment and assets and other potential
changes in working capital from the balance sheet. Free cash flow is calculated by adding the net
income and noncash expenses and subtracting the increase in working capital and capital
expenditures.
4. Explain the free cash flow history for the company.
Search the company’s most recent 10-K filing first for a discussion from management on
their free cash flow. If there isn’t anything in the filing, do an internet search for the
company’s free cash flow history.
The free cash flow for Tesla has not been constant for the last decade. The company had
negative annual free cash flow between 2014 and 2018. During this period, the company had not
established its strategy of manufacturing electric vehicles extensively. In 2018, the free cash flow
started rising and has remained constant (Jones et al., 2020). In 2018, Tesla had a deficit of $3
million but managed to reduce the deficit. As of 2022, the company had $8502 million of free
cash flow. This can be attributed to the increased sales of eco-friendly vehicles globally.
5. Explain the data reported in the cash flow statement for all five years reported. Include
the following details in your response:
A. Identify the amount of cash flow reported from operations.
B. Identify the amount of cash flow reported from investments.
C. Identify the amount of cash flow reported from financing.
D. Explain the correlation between each of these categories of cash flow for the past
five years.
The cash flows increased steadily for the past five years up to 2022 of Tesla’s operations.
The net cash provided by operating activities between 2020 and 2022 was (in millions) $5943
million, $11497 million, and $14724 million. In 2018 and 2019, the company collected $2098
million and $2405 million of net cash from operating activities. The net cash from investing
activities was $ 2337 million and 1436 million for 2018 and 2019. Between 2020 and 2022, the
net cash from investments was $3132, $7868, and 11973. The cash flow from financing between
2018 and 2022 was $4277, $6783, $19901, $18144, and $16924.
Tesla has shown a positive correlation between its operating, investment, and financing
cash flows over the last five years. There has been a consistent rise in the net cash generated by
operational activities, which reached $14,724 million in 2022, demonstrating robust cash
creation from core company operations (SEC, 2022). Concurrently, the business has steadily
increased its net cash from investing operations, which reached $11,973 million in 2022 due to
smart investments in projects and assets. With net cash from financing ranging from $4,277
million in 2018 to $16,924 million in 2022, financing operations have been critical. This
demonstrates how the business uses outside finance sources and capital market activity to
support its expansion plans.
Normalization Adjustments Analysis
1. Define the term normalization adjustment.
Normalization adjustments are alterations on financial statements intended to eliminate one-time
gains or losses, miscellaneous items, non-recurring business elements, and expenses of nonoperating assets (Oura et al., n.d.).
2. Identify three examples of balance sheet normalization adjustments that might appear.
The balance sheet normalization adjustments include the following:
•
Goodwill impairment
•
Revaluation of long-term assets
•
Restructuring liabilities
3. Identify three examples of income statement normalization adjustments that might
appear.
Examples of income statement normalization adjustments are structuring charges, amortization
of intangible assets, and impairment of short-term assets.
Summary
1. Summarize your findings for the valuation team. Include the following details in your
response:
A. Explain what you learned as you researched the company.
B. Identify the key points the valuation team needs to be aware of.
Use the common-size analysis in the Project Workbook Template to inform your
summary. Include key identifiers from your research in your summary.
Tesla’s financial performance analysis between 2018 and 2022 showed some key business
insights. The company has recorded substantial improvement since 2018 through asset
accumulation and a steady increase in net worth. However, there have been cash and accounts
receivables fluctuations due to the COVID-19 pandemic in 2020 and 2021. Practical debt
servicing skills are demonstrated by the management of obligations, especially the notable
decline in overall long-term liabilities. Variations occurred in the equity composition, although
total equity continued to rise. Successful product developments brought about this improvement,
market share increases, and operational efficiency. The debt-to-equity ratio, the current and
quick ratios, and other ratios point to a well-managed financial structure. Growing profitability
measures in the income statement, including return on equity, return on total assets, and net
profit on sales, correspond with the increase in total equity. Operational efficiency is
demonstrated by managing the gross profit margin and efficiently controlling general,
administrative, and sales expenditures. Financial solid health is shown by the steady increase in
free cash flow and the strong correlations between operating, investment, and financing cash
flows.
2. Create at least one effective visualization that supports key points. Include the following
detail in your response:
A. Appropriate labels for the visualization(s).
Examples of ideas for your visualization(s) include a line chart showing sales growth and
gross profit margin and other expenses or a graph of the ratio analysis data.
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2018
2019
2020
2021
2022
Gross profit margin
Sales growth
Sales, general and administrative expenses
Milestone Two References
Jones, B., Elliott, R. J. R., & Nguyen-Tien, V. (2020). The EV revolution: The road ahead for
critical raw materials demand. Applied Energy, 280, 115072.
https://doi.org/10.1016/j.apenergy.2020.115072
Oded, J. (2020). Payout policy, financial flexibility, and agency costs of free cash flow. Journal
of Business Finance & Accounting. https://doi.org/10.1111/jbfa.12407
Oura, H., Schumacher, L., Chan-Lau, J., Demekas, D. G., Gray, D. F., Hesse, H., Jobst, A. A.,
Kopp, E., Muñoz, S., Ong, L. L., Sampic, C., Schmieder, C., & Wehrhahn, R. (n.d.).
Chapter 2 Macro-Financial Stress Testing: Principles and Practices. International
Monetary Fund. https://www.elibrary.imf.org/view/book/9781484310717/ch002.xml
Rounaghi, M. M., Jarrar, H., & Dana, L.-P. (2021). Implementation of strategic cost management
in manufacturing companies: overcoming costs stickiness and increasing corporate
sustainability. Future Business Journal, 7(1), 1–8. Springer open.
https://doi.org/10.1186/s43093-021-00079-4
SEC. (2022). United States Security and Exchange Commission. Tesla Form 10-K.
https://www.sec.gov/Archives/edgar/data/1318605/000095017022000796/tsla20211231.htm
Milestone Three: Economic Outlook
Microeconomic Industry Analysis
1. Explain the industry outlook for the company. Include the following details in your
response:
A. Identify the primary industry the company operates in.
B. Provide a general overview of the size of the industry both domestically and
internationally.
C. Explain current industry trends and emerging technologies that might impact the
company’s industry in the future.
[Insert text.]
2. Explain how the supply and demand for the company’s industry may affect consumer
behavior. Include the following details in your response:
A. Explain major events have impacted supply and demand for the company’s
industry.
B. Identify if there have been any supply chain issues. If so, explain how these issues
have affected overall supply and demand.
[Insert text.]
3. Evaluate the competitive landscape for the company. Include the following details in
your response:
A. List the company’s current percentage of the market share in this industry.
B. List the company’s top three competitors and what percentage of the market share
each competitor holds.
C. Explain how the percentage of market share changed over the last three years for
the company and its competitors.
D. Explain the new competitors entering this industry.
[Insert text.]
4. Identify key data from the SWOT analysis for the company and its primary competitor.
Include the following details to your response:
A. Provide the citation for SWOT analysis from a reputable source for the company.
B. Provide the citation for SWOT analysis from a reputable source for the
company’s primary competitor.
C. Identify the company’s major strengths and weaknesses compared to the
company’s primary competitor.
[Insert text.]
5. Evaluate the impact of new or recently changed regulations specific to the company’s
industry. Include the following details in your response:
A. Provide a citation to the specific new regulation.
B. Explain the advantages and/or disadvantages of the new regulation(s) for the
company’s industry.
[Insert text.]
6. Identify potential international issues with the company expanding into global markets.
Consider the following questions to guide your response:
A. What historical data may affect the company as it expands?
B. What potential future issues may arise based on current economic conditions?
Search the company’s most recent 10-K filing first for information on protentional
international issues. Search in Part 2, Item 7: Management’s Discussion and Analysis of
Financial Condition and Results of Operations. If there isn’t anything in the filing, do an
internet search for news stories and/or issues regarding the company’s experience with
expanding into global markets.
[Insert text.]
7. Describe labor market trends in the company’s industry.
[Insert text.]
8. Explain how labor market trends might impact the company’s operations.
[Insert text.]
General Macroeconomic Analysis
1. Explain macroeconomic trends that might impact the company and/or its industry now or
in the future. Consider the following questions to guide your response:
A. How could economic output and consumption trends impact the company and/or
its industry?
B. How have interest rate changes impacted the company?
C. How might the current Gross Domestic Product (GDP) and its projected future
movement impact the company’s future operations?
[Insert text.]
2. Identify changes in monetary policy trends that impacted the domestic and/or global
economy the company’s operates in.
[Insert text.]
3. Explain how monetary policy changes have affected the company and/or its industry.
[Insert text.]
4. Identify changes in trade policy trends that impacted the domestic and/or global economy
the company operates in.
[Insert text.]
5. Explain how trade policy changes have affected the company and/or its industry.
[Insert text.]
Summary
1. Summarize your findings for the valuation team. Include the following details in your
response:
A. Explain what you learned as you researched the external factors for the company.
B. Identify the key points the valuation team needs to be aware of.
[Insert text.]
2. Create at least one effective visualization that supports key points. Include the following
detail in your response:
A. Appropriate labels for the visualization(s).
Create an effective visualization(s) based on your research to support your summary
report. Examples of ideas for your visualization(s) include a graph showing any of the
key economic indicators over the past five years, showing changes in market share of key
competitors over the past 3-5 years, or showing the industry outlook projections.
[Insert visualization(s).]
Milestone Three References
[Insert text.]
Project
Assumptions and Rationale
Address rubric criteria 1-7 in this section.
[Insert text.]
Analysis
Address rubric criteria 8-10 in this section.
[Insert text.]
Project References
[Insert text.]
Valuation Team Report
This Valuation Team Report will be submitted separately. Refer to the Project Guidelines and
Rubric for submission guidelines.
Financial St
2018
2019
Assets
Current Assets
Cash and Cash Equivalents
Accounts Receivable Net
Inventory
Other Current Assets
Total Current Assets
$
$
$
$
$
3,686.00
949.00
3,113.00
366.00
8,114.00
$
$
$
$
$
6,268.00
1,324.00
3,552.00
959.00
12,103.00
Property, Plant, and Equipment Net
Intangibles
Other Assets
Total Non-Current/Fixed Assets
$
$
$
$
11,330.00
282.00
572.00
12,184.00
$
$
$
$
10,396.00
339.00
1,470.00
12,205.00
Total Assets
$
20,298.00 $
24,308.00
$
$
$
$
3,404.00 $
2,094.00 $
2,568.00
8,066.00 $
3,771.00
3,222.00
8,778.00
Long-Term Debt and Lease Obligations
Other Long-Term Liabilities
Total Long-Term Liabilities
$
$
$
9,404.00 $
2,710.00 $
12,114.00 $
11,634.00
2,691.00
14,325.00
Total Liabilities
$
20,180.00 $
23,103.00
Common Stock, Less Treasury
Additional Paid in Capital
Retained Earnings
Other Equity
Total Equity
$
$
$
$
$
1.00
10,249.00
8.00
5,318.00
15,576.00
$
$
$
$
$
1.00
12,736.00
(36.00)
(6,083.00)
6,618.00
Total Liabilities & Equity
$
35,756.00 $
29,721.00
Non-Current Assets
Liabilities and Owners’ Equity
Current Liabilities
Accounts Payable
Accrued Expenses and Other Current Liabilities
Current Portion of Debt and Leases
Total Current Liabilities
1,785
Long-Term Liabilities
Owners’ Equity
Check Digit: This should be 0 or the balance sheet is out of
balance. Check your work.
$
(15,458.00) $
(5,413.00)
TESLA INC.
Balance Sheet
2018-2022
[in millions]
Financial Statements
2020
Vertical Analysis
2021
2022
2018
$
$
$
$
$
19,384.00
1,886.00
4,101.00
1,346.00
26,717.00
$
$
$
$
$
17,576.00
1,913.00
5,757.00
1,723.00
26,969.00
$
$
$
$
$
16,253.00
2,952.00
12,839.00
2,941.00
34,985.00
18.16%
4.68%
15.34%
1.80%
39.97%
$
$
$
$
12,747.00
313.00
1,536.00
14,596.00
$
$
$
$
18,884.00
257.00
2,138.00
21,279.00
$
$
$
$
23,548.00
215.00
4,193.00
27,956.00
55.82%
1.39%
2.82%
60.03%
$
41,313.00 $
48,248.00 $
62,941.00
100.00%
$
$
$
$
6,051.00
3,855.00
2,132.00
12,038.00
15,255.00
5,719.00
1,589.00
22,563.00
$
$
$
$
10,025.00
7,142.00
1,502.00
18,669.00
16.77%
10.32%
12.65%
39.74%
$
$
$
9,556.00 $
3,330.00 $
12,886.00 $
5,245.00 $
3,546.00 $
8,791.00 $
1,597.00
5,330.00
6,927.00
46.33%
13.35%
59.68%
$
24,924.00 $
31,354.00 $
25,596.00
99.42%
$
$
$
$
$
1.00 $
27,260.00 $
363.00 $
(5,399.00) $
22,225.00 $
3.00
29,803.00
329.00
54.00
30,189.00
$
$
$
$
$
3.00
32,177.00
12,885.00
(361.00)
44,704.00
0.00%
50.49%
26.20%
#REF!
#REF!
$
47,149.00 $
61,543.00 $
70,300.00
$
$
$
$
#REF!
$
(5,836.00) $
(13,295.00) $
(7,359.00)
Vertical Analysis, Common Size Statements
2019
2020
2021
2022
25.79%
5.45%
14.61%
3.95%
49.79%
46.92%
4.57%
9.93%
3.26%
64.67%
36.43%
3.96%
11.93%
3.57%
55.90%
25.82%
4.69%
20.40%
4.67%
55.58%
42.77%
1.39%
6.05%
50.21%
30.85%
0.76%
3.72%
35.33%
39.14%
0.53%
4.43%
44.10%
37.41%
0.34%
6.66%
44.42%
100.00%
100.00%
100.00%
100.00%
15.51%
13.25%
7.34%
36.11%
14.65%
9.33%
5.16%
29.14%
31.62%
11.85%
3.29%
46.76%
15.93%
11.35%
2.39%
29.66%
47.86%
11.07%
58.93%
23.13%
8.06%
31.19%
10.87%
7.35%
18.22%
2.54%
8.47%
11.01%
95.04%
60.33%
64.99%
40.67%
0.00%
52.39%
-0.15%
-25.02%
27.23%
0.00%
65.98%
0.88%
-13.07%
53.80%
0.01%
61.77%
0.68%
0.11%
62.57%
0.00%
51.12%
20.47%
-0.57%
71.03%
122.27%
114.13%
127.56%
111.69%
TE
Incom
20
[in
Financial Statement
Total Revenue (or Sales)
Cost of Sales
$
$
2018
21,461.00 $
17,419.00 $
Gross Profit
$
4,042.00 $
4,069.00
Sales, General, and Administrative Expenses
$
2,835.00 $
2,646.00
Operating Income
$
1,207.00 $
1,423.00
Other Income (Expense) *If expense is reported, enter as a negative number.
Interest Income / (Expense)
$
(663.00) $
Other Income (Expense)
$
22.00 $
(685.00)
45.00
Net Income (Loss), Before Tax
783.00
Vertical Analysis on Revenue only
$
566.00 $
2019
24,578.00
20,509.00
14.52%
TESLA INC.
Income Statement
2018-2022
[in millions]
Financial Statements
Vertical Analysis, Common Size
$
$
2020
31,536.00 $
24,906.00 $
2021
53,823.00 $
40,217.00 $
2022
81,462.00
60,609.00
2018
100.00%
81.17%
2019
100.00%
83.44%
$
6,630.00 $
13,606.00 $
20,853.00
18.83%
16.56%
$
3,145.00 $
4,517.00 $
3,946.00
13.21%
10.77%
$
3,485.00 $
9,089.00 $
16,907.00
5.62%
5.79%
$
$
(748.00) $
(122.00) $
(371.00) $
135.00 $
(191.00)
(43.00)
-3.09%
0.10%
-2.79%
0.18%
$
2,615.00 $
8,853.00 $
16,673.00
2.64%
3.19%
28.31%
70.67%
51.35%
ical Analysis, Common Size Statements
2020
100.00%
78.98%
2021
100.00%
74.72%
2022
100.00%
74.40%
21.02%
25.28%
25.60%
9.97%
8.39%
4.84%
11.05%
16.89%
20.75%
-2.37%
-0.39%
-0.69%
0.25%
-0.23%
-0.05%
8.29%
16.45%
20.47%
TESLA INC.
Ratio Analysis
2018-2022
2018
2019
2020
2021
2.22
1.77
14679.00
1.20
0.86
4406.00
Liquidity Ratios
Current Ratio
Quick Ratio
Working Capital
$
1.01
1.38
0.57
0.86
48.00 $ 3,325.00
Activity Ratios
Receivable Turns
Days in Receivables
Revenues/Working Capital
Revenues/Fixed Assets
Revenues/Total Assets
Inventory Turns
Days in Inventory
Payables Turns
Days in Payables
22.61
16.14
447.10
1.89
1.06
5.60
65.23
5.12
71.33
18.56
19.66
7.39
2.36
1.01
5.77
63.22
5.44
67.11
16.72
21.83
2.15
2.47
0.76
6.07
60.10
4.12
88.68
28.14
12.97
12.22
2.85
1.12
6.99
52.25
2.64
138.45
0.73
1.57
0.57
0.63
3.63%
2.79%
2.64%
11.83%
3.22%
3.19%
11.77%
6.33%
8.29%
29.33%
18.35%
16.45%
Coverage/Leverage Ratios
Fixed Assets/Equity
Profitability Ratios
Return on Equity
Return on Total Assets
Net Profit on Revenues
2022
1.87
1.03
16316.00
27.60
13.23
4.99
3.46
1.29
4.72
77.32
6.05
60.37
0.53
37.30%
26.49%
20.47%
[Insert how dat
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Current Assets
Cash and Cash Equivalents
Accounts Receivable, Net
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Other Current Assets
Total Current Assets
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Non-Current Assets
Property, Plant and Equipment Net
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Total Non-Current/Fixed Assets
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Liabilities and Owners’ Equity
Current Liabilities
Accounts Payable
Accrued Expenses and Other Current Liabilities
Current Portion of Debt and Leases
Total Current Liabilities
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Long-Term Liabilities
Long-Term Debt and Lease Obligations
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balance. Check your work.
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–
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–
*If you received a perfect score on the Milestone Two, please place an “X” next to Miestone Two Perfect Score. Then you d
have to complete this tab because all entries on the Milestone Corrected Balance Sheet tab are correct.
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Balance Sheet
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Financial Statements
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[Insert co
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[Insert how data is record
Financial Statement
Total Revenue (or Sales)
Cost of Sales
Gross Profit
Sales, General, and Administrative Expenses
Operating Income
#VALUE!
[insert value]
[insert value]
#VALUE!
[insert value]
[insert value]
#VALUE!
#VALUE!
[insert value]
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#VALUE!
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Other Income (Expense) *If expense is reported, enter as a negative number.
Interest Income / (Expense)
Other Income (Expense)
Net Income (Loss), Before Tax
Vertical Analysis on Revenue Only
[insert value]
[insert value]
[insert value]
[insert value]
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Income Statement
[Insert period covered]
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Financial Statements
#VALUE!
[insert value]
[insert value]
#VALUE!
[insert value]
[insert value]
#VALUE!
#VALUE!
[insert value]
#VALUE!
[insert value]
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[insert most current year]
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Sheet tab are correct.
one Two. Then enter in your
ith an asterisk.
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#VALUE!
#VALUE!
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#VALUE!
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Ratio Analysis
[Insert period covered]
#VALUE!
#VALUE!
#VALUE!
#DIV/0!
#VALUE!
$
–
#DIV/0!
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$
–
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Liquidity Ratios
Current Ratio
Quick Ratio
Working Capital
Activity Ratios
Receivable Turns
Days in Receivables
Revenues/Working Capital
Revenues/Fixed Assets
Revenues/Total Assets
Inventory Turns
Days in Inventory
Payables Turns
Days in Payables
Coverage/Leverage Ratios
Fixed Assets/Equity
Profitability Ratios
Return on Equity
Return on Total Assets
Net Profit on Revenues
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#VALUE![insert most current year]
#DIV/0!
#VALUE!
$
–
#DIV/0!
#VALUE!
$
–
#VALUE!
#VALUE!
#VALUE!
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[Insert company name]
Project Income Statements
[Insert dates of period covered]
Iinsert how data is recorded. (i.e. thousands or mil
Financ
Total Revenue (or Sales)
Estimated Annual Revenue Growth Rate
Gross Profit
2023
#VALUE!
[insert value]
2024
#VALUE!
[insert value]
#VALUE!
#VALUE!
Estimated Annual Gross Profit Margin
[insert value]
[insert value]
Sales, General, and Administrative Expenses (SG&A)
Estimated Annual SG&A (% of Sales)
#VALUE!
[insert value]
#VALUE!
[insert value]
Other Income (Expense) *If expense is reported, enter as a negative number.
Interest Income / (Expense)
Other Income (Expense)
Net Income (Loss)
[insert value]
[insert value]
#VALUE!
[insert value]
[insert value]
#VALUE!
t company name]
Income Statements
tes of period covered]
orded. (i.e. thousands or millions)]
Financial Statements
2025
#VALUE!
[insert value]
2026
#VALUE!
[insert value]
2026
#VALUE!
[insert value]
Terminal
#VALUE!
[insert value]
#VALUE!
#VALUE!
#VALUE!
#VALUE!
[insert value]
[insert value]
[insert value]
[insert value]
#VALUE!
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[insert value]
[insert value]
[insert value]
[insert value]
[insert value]
[insert value]
[insert value]
[insert value]
#VALUE!
#VALUE!
#VALUE!
#VALUE!
[Insert company name]
Development of Discount Rate and Capitalization Rate Table
Risk-free long term U.S. Government bond rate
Equity risk premium
Industry premium estimate
Cost of equity (Discount Rate)
Less: Long-term sustainable growth rate
Capitalization Rate
NOTES
(A) Yield on the twenty-year U.S. Treasury bond as of December 31, 20XX, per the U.S. Treasury
(B) Long-horizon expected return of large stocks over risk free securities, U.S. Equity Risk Premium (6.0%)
(C) SIC code XX, 1.5%
(D) Appraiser’s judgement concerning company-specific risk
(E) Estimated long-term growth rate based on inflation, Federal Reserve Bank of Philadelphia
me]
italization Rate Table
2022
Rate
Note
2.60%
6.00%
1.50%
3.00%
13.10%
-2.50%
10.60%
A
B
C
D
Sum of A – D above
E
[Insert company name]
Discounted Cash Flow Method
[Insert dates of period covered]
Projected for Ye
2023
#VALUE!
Forecasted Net Income
Plus
Depreciation
*Less
Cash Used for Investments
Cash Used for Financing
Net Cash Flow
Present Value of Cash Flows
2024
#VALUE!
[insert value]
[insert value]
[insert value]
[insert value]
#VALUE!
[insert value]
[insert value]
#VALUE!
#VALUE!
#VALUE!
13.10%
Net Present Value of Future Cash Flows
Net Present Value of Terminal Cash Flow
#VALUE!
#VALUE!
10.60%
Total Indication of Value
#VALUE!
1.00
* NOTE: Cash USED must be entered as negative
numbers.
2.00
company name]
d Cash Flow Method
es of period covered]
Projected for Years Ending December 31,
2025
#VALUE!
2026
#VALUE!
2026
#VALUE!
Terminal
#VALUE!
[insert value]
[insert value]
[insert value]
[insert value]
[insert value]
[insert value]
#VALUE!
[insert value]
[insert value]
#VALUE!
[insert value]
[insert value]
#VALUE!
[insert value]
[insert value]
#VALUE!
#VALUE!
#VALUE!
#VALUE!
#VALUE!
3.00
4.00
5.00
[Insert company name]
Final Computation of Value
As of [Enter date]
Indicated Value of Equity
Weight
Weighted Value
Indicated Value with Voting Rights
*Less: DLOC (Discount for Lack of Control)
15%
Marketable, Minority Value
**Less: DLOM (Discount for Lack of Marketability)
25%
Nonmarketable, Minority Value
Value of a 1% Interest
*Let this default to the rate applied here for the DLOC. It is
possible to override this rate with your own. However, an
explanation must be provided why it was changed.
**Let this default to the rate applied here for DLOM. It is
possible to override this rate with your own. However, an
explantation must be provided on why it was changed.
ame]
Value
e]
Income Approach:
Discounted Cash Flow Method
#VALUE!
100.00%
#VALUE!
#VALUE!
#VALUE!
#VALUE!
#VALUE!
#VALUE!
#VALUE!
ACC 345 Milestone Two
Basel Sukkar
Southern New Hampshire University
ACC 345: Financial Statement Analysis/Business Valuation
Jamie Zimmerman
Feb 11th, 2024
Milestone One: Introduction …………………………………………………………………………………………….. 3
Links ………………………………………………………………………………………………………………………….. 3
History and Overview ………………………………………………………………………………………………….. 3
Summary ……………………………………………………………………………………………………………………. 6
Milestone One References ……………………………………………………………………………………………. 7
Milestone Two: Financial Analysis …………………………………………………………………………………… 8
Balance Sheet Analysis ………………………………………………………………………………………………… 8
Income Statement and Cash Flow Analysis …………………………………………………………………… 11
Normalization Adjustments Analysis …………………………………………………………………………… 14
Summary ………………………………………………………………………………………………………………….. 15
Milestone Two References ………………………………………………………………………………………….. 16
Milestone Three: Economic Outlook ……………………………………………………………………………….. 17
Microeconomic Industry Analysis ……………………………………………………………………………….. 17
General Macroeconomic Analysis ……………………………………………………………………………….. 24
Summary ………………………………………………………………………………………………………………….. 26
Milestone Three References ………………………………………………………………………………………… 27
Project …………………………………………………………………………………………………………………………. 28
Assumptions and Rationale …………………………………………………………………………………………. 28
Analysis ……………………………………………………………………………………………………………………. 28
Project References ……………………………………………………………………………………………………… 28
Valuation Team Report ………………………………………………………………………………………………. 28
Milestone One: Introduction
Links
1. Provide the most recent SEC Form 10-K Filing link for the company.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000095017023001409/tsla20221231.htm
2. Provide the most recent SEC Proxy Filing link for the company.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000119312523094075/d4513
42ddef14a.htm
History and Overview
1. Provide a brief company history overview based on external research of the company.
Consider the following questions to guide your response:
A. How long has the company been in business?
B. Who was the original founder of the company?
C. What significant changes to company leadership have occurred?
D. How has the company changed since its beginning? Consider expansion of
locations or products/services, etc.
The company chosen is Tesla inc, and it has been in business for 20 years. The
founders of Tesla are Elon Musk, Martin Eberhard, JB Straubel, Marc Trapenning, Ian
Wright who originally founded the company. One of the major changes that Tesla has
experienced during its years in business was and still is the impact that the current CEO
Elon Musk has had on the company’s progress and success,through his focus on electrical
vehicles and strong social media influence, Elon Musk was able to lift the company to it’s
highest potential yet. e company has been mainly producing Electrical vehicles varying
from sedans, SUVs, and trucks which shaped the direction of the company as a mainly
EV car manufacturer.
2. Identify all of the company’s major locations for their facilities and/or other properties.
Tesla has many stores locations and manufacturing facilities, and the most employed
facility is a Tesla factory in Fremont, California where the electrical vehicles are produced, then
the Gigafactory in Nevada where the batteries are produced. In addition, there are four more
giga factories to accommodate global production.
3. Identify all of the customers recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business.
Based on the 10-K filing, Tesla’s customers consist of people seeking an
electrical vehicle, also certain entities and organizations are in partnerships with Tesla
such as government entities, freight services given the new Tesla freight truck.
4. List all of the names of the executive management team of the company.
Find this information in the annual Form 10-K filing, in Part 3, Item 10:
Directors, Executive Officers and Corporate Governance or in the Annual Proxy filing,
under “Executive Officers,” or “Officers Compensation.” You may copy and paste a
chart into this section from the annual Form 10-K filing. Be sure to add your own
explanation of the information in the chart along with an attribution and a citation in the
References section at the bottom of this template.
Name
Position
Elon Musk
Technoking of Tesla and
Chief Executive Officer
Zachary Kirkhorn
Master of Coin and Chief
Financial Officer
Andrew Baglino
Senior Vice President,
Powertrain and Energy
Engineering
Tesla executive team consists of the CEO Elon Musk, the CFO Zachary Kirkhorn, and the Sr.
Vice President Andrew Baglino.
5. Identify all of the competition recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business.
Tesla’s competition is huge as it’s part of the automotive industry, shifting
towards electrical vehicle production, which will only increase in the upcoming years.
Another side of Tesla’s competition comes from the energy storage and solar energy
systems sector.
6. Identify all of the major shareholders of the company.
Find this information in the Annual Proxy filing, under “Beneficial Ownership.”
Tesla’s shareholders consist of a majority shareholding by Tesla’s CEO Elon
Musk, with a shareholding of 20.6% beneficially owned and the same goes to the
company’s CFO Zachary Kirkhorn. Other shareholders such as The Vanguard Group
have a 6.9% shareholding, Blackrock, inc. With a 5.6% shareholding.
7. Describe business risks recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1A: Risk Factors.
Item 1A in the annual Form 10-K will be lengthy. Do your best to summarize the risks
the company has identified.
Business risks facing Tesla are mostly related to production, supply, competition, and
constant change in regulations. 
8. Explain how the company is committed to Environmental, Social and Governance (ESG)
efforts and sustainability.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business or in
Part 2, Item 7: Management’s Discussion and Analysis of Financial Condition and
Results of Operations. If your company does not provide this information in its SEC
filings, you will need to do external research to determine your company’s commitment
to ESG efforts and sustainability. Be sure to add your own explanation of the information
you researched. Include appropriate attributions in your explanation and a citation in the
References section at the bottom of this template.
Tesla’s commitment to environmental, Social, and Governance (ESG) is demonstrated
through their products which promote sustainability and focus on renewal energy, also their
electrical vehicles have been proven to reduce Carbon emmisions. In addition to their solar
energy systems.
9. Describe the company’s Leadership in Energy and Environmental Design (LEED) status.
Consider the following questions to guide your response:
A. Is the company currently LEED certified?
B. If the company is not currently LEED certificated, is it working towards
becoming LEED certified?
Review the Form 10-K filing to see if your company is LEED certified or if it discusses
its certifications. If your company does not provide this information in its SEC Filings,
you will need to do external research to determine your company’s LEED status. Be sure
to add your own explanation of the information you researched. Include appropriate
attributions in your explanation and a citation in the References section at the bottom of
this template.
Tesla has taken substantial initiatives to gain its recognition for energy and
environmental design, known as LEED status. While the specific LEED certifications for
Tesla’s facilities may vary, the company prioritizes sustainability across all its operations.
One of Tesla’s illustrations of LEED is in Tesla’s Gigafactories, where sustainable
designs and the integration of renewable energy sources are prioritized, and that is
apparent as the Tesla Gigafactory located in Nevada has been awarded the LEED Gold
certification, presenting the company’s dedication to environmentally conscious practices.
Summary
1. Summarize your findings for the valuation team. Include the following details in your
response:
A. Explain what you learned as you researched the company.
B. Identify the key points the valuation team needs to be aware of.
Tesla, which has been around for two decades, has gone through some big changes,
especially because of CEO Elon Musk’s focus on electric vehicles (EVs) and his strong presence
on social media, which has boosted the company. They’re all about EVs, and they’ve got various
stores and factories. The one in Fremont, California, is where they make most of EVs, and the
Gigafactory in Nevada handles the batteries. They’re facing competition in both EVs and energy
storage and solar systems sectors.
Tesla’s customers include regular consumers looking for EVs and some partnerships with
government agencies and freight services. At the top, you’ve got Elon Musk, Zachary Kirkhorn
as the CFO, and Andrew Baglino as Sr. Vice President. Shareholders, mainly Musk and
Kirkhorn, also include big names like The Vanguard Group and BlackRock.
Tesla has got some risks like production issues, supply chain stuff, tough competition,
and changes in regulations. They’re all about being environmentally friendly and socially
responsible, with a focus on renewable energy and cutting down on carbon emissions. They’re
even going for LEED status for their facilities, with the Gigafactory in Nevada getting the LEED
Gold certification, showing they’re serious about being environmentally conscious.
2. Create at least one effective visualization that supports key points. Include the following
detail in your response:
A. Appropriate labels for the visualization(s).
Create an effective visualization(s) based on your research to support your summary
report. Examples of ideas for your visualization(s) include creating a timeline of the
company history, creating a map of the company’s locations, creating a chart of major
shareholders showing ownership and broken down by percentages, etc.
Milestone One References
Team, T.I. (no date) Who are tesla’s (TSLA) main competitors?, Investopedia. Available at:
https://www.investopedia.com/ask/answers/120314/who-are-teslas-tsla-maincompetitors.asp#toc-the-bottom-line (Accessed: 14 January 2024).
Cadie Thompson, K.L. (no date) Tesla history’s most important moments, from its founders’
launch to bringing EVS mainstream, Business Insider. Available at:
https://www.businessinsider.com/tesla-history-founders#2009-5 (Accessed: 14 January
2024).
Milestone Two: Financial Analysis
Balance Sheet Analysis
1. Explain the findings regarding the company’s asset accounts for the previous five years.
Include the following details in your response:
A. Describe in detail the material changes in the asset accounts, including changes in
cash, AR, inventory, property, plant and equipment, and goodwill.
B. Explain what these changes might be related to.
Tesla had a significant improvement in its asset accumulation between 2018 and 2022. The
asset accounts increased their net worth steadily throughout the period. The cash and cash
equivalents increased from $3686 to $17576 in 2021 but fell to 16253 in 2022. The fall was less
significant, considering the previous years had seen a marginal rise in cash. The accounts
receivables increased from 2018 to 2019, but there was a significant fall in 2020 and 2021 (SEC,
2022). This fall was presumably caused by a lack of cash on hand during the COVID pandemic
when restrictions on the movement of people were put in place. The A/R, however, rose by
4.69% in 2022. The inventory fell between 2018 and 2021 but rose in 2022. The fall in the
inventory shows Tesla has weak sales, which is considered overstocking, mostly likely due to the
effects of COVID on the economy. The property, plant, equipment, and goodwill have had a
steady fall throughout the five years. The fall in these assets shows a diminishing value of assets
over time. This fall is mainly caused by physical and economic depreciation.
2. Explain the findings regarding the company’s liability accounts for the previous five
years. Include the following details in your response:
A. Describe in detail the material changes in both current and long-term liabilities.
B. Explain what these changes might be related to.
The current liabilities fall from 2018 to 2020 but significantly rise in 2021. The fall was
again observed in 2022, where current liabilities fell from 49.76% in 2021 to 29.66% in 2022.
The total long-term liabilities fell from 59.68% to 11.01% in the five years, while the total
liabilities fell from 99.42% to 40.67%. The current liabilities were higher and did not have a
steady trend because they would rise for a year and fall before rising again. This indicates that
Tesla did not have an effective plan for using its current assets and short-term liabilities.
However, long-term and total long-term liabilities fell significantly within the five years,
showing Tesla was in a position to service its loans.
3. Explain the findings regarding the company’s equity accounts for the previous five years.
Include the following details in your response:
A. Describe in detail the changes to equity accounts, including common stock,
treasury stock, or additional paid in capital (i.e., whether the company raised
funds or retired stock).
B. Explain how the changes compare to the net income or other sections of the
balance sheet.
C. Identify whether the company is paying out dividends.
D. Describe in detail how that the company’s dividend payouts have changed over
the past five years.
E. Describe in detail the changes in “total equity” (representing the current “book
value” of the company).
Tesla’s common stock was at 0% and rose once in 2021 to 0.01% before returning to 0% in
2022. The additional paid-in capital rose from 50.49% in 2018 to 65.98% in 2020, falling to
51.12% in 2022. Between 2019 and 2021, the returned earnings and other equity remained below
1%. However, the entire equity ranged between 27.23% and 71.03%, a continuous improvement
to 2022 (SEC, 2022). The balance sheet had a low retained earnings record, indicating that the
company had profitable operations. However, the negative records show that Tesla’s dividend
distributions exceeded its net income. Tesla was, therefore, making some losses between 2018
and 2022.
The fact that Tesla had negative retained earnings ranging from -25.02% in 2019 to -0.57%
shows it was not paying dividends. The shareholders also experience the loss. There was no
payment of dividends between 2018 and 2022 since there were minimal retained earnings. The
liabilities would exceed the assets, so the owner’s equity was significantly low (SEC, 2022).
Between 2019 and 2020, there was a notable rise in total equity from 27.23% to 53.80%,
indicating a noteworthy expansion in the overall worth of the business. Between 2020 and 2022,
there was a further increase in total equity, which implied continued positive performance.
Tesla’s successful product innovations, increased market share, and operational efficiency could
have influenced these changes.
4. Explain what the company’s current and prior year liquidity and debt-to-equity ratios say
about the company’s financial health. Consider the following questions to guide your
response:
A. What is an appropriate level of debt?
B. How does this year’s performance compare to the previous year?
The current ratio of Tesla in 2022 was 1.87, which increased from 1.20 in 2021. The
quick and working capital ratios were 1.03 and $16316 in 2022, increasing from 0.86 and $4406,
respectively. These ratios were within the recommended range of 1 to 1.5, except for the quick
ratio in 2021, which was below 1. The debt-to-equity ratio above 1.0 shows that the company
was conducting investments with slight risk in 2022. In 2021, the company was conducting less
risky business, insinuating that there could be low organizational operations and resource
utilization.
Income Statement and Cash Flow Analysis
1. Explain the profitability ratios that are included in the company’s financial statements.
Include the following detail in your response:
A. Explain any trends and relate any changes back to the balance sheet and income
statement accounts used in the ratio calculation.
Use appropriate profitability ratio(s) and a vertical analysis (using the common-size
analysis in the Project Workbook Template).
The equity return substantially rose continuously from 3.63% in 2018 to 37.30% in 2022.
The significant rise was between 2020 and 2021 when the ratio rose from 11.77% to 29.33%.
The return on total assets rose from 2.79% to 26.49% between 2018 and 2022, with the
significant rise being 6.33% to 18.35% between 2020 and 2021 (SEC, 2022). The net profit on
revenues rose from 2.64% in 2018 to 20.47% in 2022, and again, the significant rise was
between 2020 and 2021 when the ratio rose from 8.29% to 16.45%. The rise of these ratios can
be traced back to the balance sheet, where the total equity rose significantly from $6618 to
$44704 between 2019 and 2022. The ratios change can also be traced in the income statement,
where the net income rose steadily over the five years.
2. Explain the profitability of the company for the prior and current years. Consider the
following questions to guide your response:
A. What does a vertical analysis of the company’s gross revenue show you? What is
the percentage (%) of change year over year for these past five years?
B. How are the company’s COGS and gross profit margin being managed?
C. How are the company’s sales, general, and administrative expenses being
managed as a percentage of sales? What does this tell you about the company’s
current business cycle? Remember, it is normal for this percentage to rise when
sales are dropping and fall when sales are rising. If this is not happening, what
might be the reason?
Use appropriate profitability ratio(s) and a vertical analysis (using the common-size
analysis in the Project Workbook Template).
Tesla’s gross profit has been consistent since 2018. The company had 25.60% gross profit
in 2022, an increase from 25.28% in 2021 (SEC, 2022). The 2018, 2019, and 2020 gross profits
were 18.83%, 16.56%, and 21.02%, respectively. The cost of goods reduced steadily from
81.17% to 74.40%, although Tesla had seen a slight increase to 83.44% in 2019. Tesla manages
the cost of goods sold and the gross profit margin by enhancing operational efficiency. This is
indicated by the increased sales and inventory that have been reduced in recent years.
The pattern of sales, general, and administrative expenses spending as a proportion of sales
dropping suggests that sales, general, and administrative expenses are being adequately
controlled. Similar calculations may be used to get the sales, general, and administrative
expenses percentages changed over the previous year, and the COGS percentages changed.
Overall, the decline in sales and general and administrative expenses as a proportion of sales is
favorable, demonstrating effective control of operational costs relative to sales (Rounaghi et al.,
2021). The corporation may successfully limit costs if the percentage of sales, general, and
administrative expenses is dropping. However, it is essential to consider the whole cost of these
expenses and how they affect business operations. The corporation may be effectively
controlling its revenue expenditures if there is a downward trend in sales, general, and
administrative expenses as a proportion of sales (Rounaghi et al., 2021). Sales, general, and
administrative costs are often expected to increase during declining sales and decrease during
periods of growing sales. If this is not occurring, it can be because alternative strategic choices or
efficient cost control were made.
3. Describe what free cash flow is and how it is calculated.
Free cash flow is the amount of money remaining after the company has compensated its
operational supporters and paid for capital expenditures. The free cash flow measures the
profitability, excluding noncash expenses recorded in the income statement (Oded, 2020).
Instead, the free cash flow includes the spending on equipment and assets and other potential
changes in working capital from the balance sheet. Free cash flow is calculated by adding the net
income and noncash expenses and subtracting the increase in working capital and capital
expenditures.
4. Explain the free cash flow history for the company.
Search the company’s most recent 10-K filing first for a discussion from management on
their free cash flow. If there isn’t anything in the filing, do an internet search for the
company’s free cash flow history.
The free cash flow for Tesla has not been constant for the last decade. The company had
negative annual free cash flow between 2014 and 2018. During this period, the company had not
established its strategy of manufacturing electric vehicles extensively. In 2018, the free cash flow
started rising and has remained constant (Jones et al., 2020). In 2018, Tesla had a deficit of $3
million but managed to reduce the deficit. As of 2022, the company had $8502 million of free
cash flow. This can be attributed to the increased sales of eco-friendly vehicles globally.
5. Explain the data reported in the cash flow statement for all five years reported. Include
the following details in your response:
A. Identify the amount of cash flow reported from operations.
B. Identify the amount of cash flow reported from investments.
C. Identify the amount of cash flow reported from financing.
D. Explain the correlation between each of these categories of cash flow for the past
five years.
The cash flows increased steadily for the past five years up to 2022 of Tesla’s operations.
The net cash provided by operating activities between 2020 and 2022 was (in millions) $5943
million, $11497 million, and $14724 million. In 2018 and 2019, the company collected $2098
million and $2405 million of net cash from operating activities. The net cash from investing
activities was $ 2337 million and 1436 million for 2018 and 2019. Between 2020 and 2022, the
net cash from investments was $3132, $7868, and 11973. The cash flow from financing between
2018 and 2022 was $4277, $6783, $19901, $18144, and $16924.
Tesla has shown a positive correlation between its operating, investment, and financing
cash flows over the last five years. There has been a consistent rise in the net cash generated by
operational activities, which reached $14,724 million in 2022, demonstrating robust cash
creation from core company operations (SEC, 2022). Concurrently, the business has steadily
increased its net cash from investing operations, which reached $11,973 million in 2022 due to
smart investments in projects and assets. With net cash from financing ranging from $4,277
million in 2018 to $16,924 million in 2022, financing operations have been critical. This
demonstrates how the business uses outside finance sources and capital market activity to
support its expansion plans.
Normalization Adjustments Analysis
1. Define the term normalization adjustment.
Normalization adjustments are alterations on financial statements intended to eliminate one-time
gains or losses, miscellaneous items, non-recurring business elements, and expenses of nonoperating assets (Oura et al., n.d.).
2. Identify three examples of balance sheet normalization adjustments that might appear.
The balance sheet normalization adjustments include the following:
•
Goodwill impairment
•
Revaluation of long-term assets
•
Restructuring liabilities
3. Identify three examples of income statement normalization adjustments that might
appear.
Examples of income statement normalization adjustments are structuring charges, amortization
of intangible assets, and impairment of short-term assets.
Summary
1. Summarize your findings for the valuation team. Include the following details in you…