Financial Research Report

Student’s Name
Institution Name
Instructor’s Name
Submission Date
Tesla Inc., Financial Research Report
Over the last three years, Tesla's financial condition has been generally on an upward trend due to high product demand in the market. Although in 2020, due to the COVID 19 pandemic, most of the companies registered losses, Tesla made a turnaround by registering earnings of $721million in contrast to 2019, where the company made a loss of $862 million (Yahoo Finance). The below graph proves that the Tesla’s financial condition is relatively healthy since the company revenues were on an upward trend from 2018 to 2020. In addition, as per the below earnings table, Tesla's actual earnings are way above the estimation.
(Yahoo finance, 2020)
Earnings per share
EPS= Net Income
Outstanding Share
2018 2019 2020
-1.14 -0.98 0.74 (Yahoo finance)
As per the above data, from 2018 to 2020, Tesla earnings per share have progressively increased from negative, which indicates the company made losses in the consecutive two years, i.e. in 2018 and 2019 but recovered and registered profit in the year 2020. Healthy earnings per share, as shown by Tesla over the years, indicate that the company is in a position to generate significant dividends to its shareholders. Also, it indicates the shareholders' wealth is growing, which encourages the investors to invest with the company that encourages growth. As the part of the profitability ratio EPS ratio is important to track because a higher EPS indicates the company has greater value, and to acquire the company shares, the investors will pay a higher price if the company share price is proportionate to its higher profits (Mehta and Ganga,2).
Quick Ratio and Current Ratio
Both Current ratio and quick ratios can be best described as liquidity ratios. The current ratio is calculated as shown below:
Current Ratio= Current Assets
Current Liabilities
For the past three years, Tesla's current ratio for 2018, 2019, and 2020 has been 0.83, 1.13, and 1.88, respectively (Yahoo finance”). Current ratio helps Tesla company gauge the financial strength in the short term. As per the statistics, Tesla has been registering a higher current ratio from the year 2018 to 2020. A higher current ratio like the one recorded in the year 2020 by Tesla indicate how stable the company is, while a low ratio like the one recorded in 2018 indicates the liquidity risk the company may be associated with if it’s not corrected on time.
The quick ratio is part of the liquidity ratio, and it's calculated with this formula:
Quick Ratio=(Current Assets−Inventories)
Current Liabilities
According to yahoo finance, Tesla quick ratio for 2018, 2019, and 2020 are 0.52, 0.80, and 1.59, respectively (Yahoo Finance). Although both the current ratio and quick ratio are similar in terms of having current liabilities as their denominator and current asset as the numerator quick ratio is much stricter. Although Tesla's quick ratio is less than 1 in the year 2018 and 2019, there is an increase of 0.28 in the year 2019 as compared to 2019, which indicates the company is improving. In the year 2020, the com...