Every public corporation has an obligation to compile financial reports on an annual, semi-annual, or quarterly basis. In this research paper, I’ll be looking at the financial report of Tesla/TSLA Inc. company for the period ending June 2021. A financial statement refers to the written records that convey the financial and business performance of a company (Robinson, 2020). These reports are usually audited by the government and accounting agencies to ensure accuracy, tax financing, or investing purposes. Balance sheet, income statement, and cash flow are the three main components of a financial statement.
A balance sheet shows the financial position of a company. It provides details about the firm’s assets, liabilities, and stockholders’ equity as of the report date. There are two types of assets, which are current and long-term assets, same as a liability which, include current and long-term liabilities (Robinson, 2020). This stratification helps in determining the liquidity of a business. Ideally, if the total amount of all current assets exceeds the total amount of all current liabilities, then the business has enough current assets to pay off all its current obligations. The equation typically used when preparing the balance sheet is; (Assets=Liabilities + Shareholders Equity).
An income statement is essential to every company. It shows the results of the company’s financial activities and operations as of the reporting period (Robinson, 2020). The income statement provides information containing sales, costs, costs of sales, operating expenses, and other expenses. The general structure of the income statement is to start with all the revenues generated, from which costs of goods sold are subtracted, and then all selling, general, and administrative expenses. The results always are either profit or loss, which is the net of income taxes.
Cash Flow Statement
No company can operate well without the knowledge of its cash movement. A cash flow is divided into operating activities, investing activities, and financial activities (Robinson, 2020). Most of all, the cash flows are listed in the operating activities section, which portrays the cash inflows and outflows related to the company’s basic operations, like changes in receivables, inventory, and payable balances. The investing activities include cash flows from purchasing or selling investment instruments, assets, or other businesses. The financing activities section includes cash flows related to acquisition or pays down of debts, dividend issuance, and stock sales.
Purpose of Each Financial Statement
The primary purpose of the balance sheet is to reveal the business’s financial status as of a specific period. The report shows how much the business owns (assets) and how much it owes (liabilities), and the amount invested in the business (equity). Management can compare the current assets total with the current liabilities total to determine if the firm has enough funds to pay off its short-term obligations. Cashbook is also used by creditors, and investors to determine when to lend, and invest in the company (Robinson, 2020). Therefore, the balance sheet serves to reveal the financial status of the business as the primary purpose.
The primary purpose of an income statement is to show if the business has made losses or profit over a specific period. It helps the management decide whether to generate profit through increasing revenue, decreasing costs, or both (Robinson, 2020). Profit can be generated by netting revenues and the costs of goods sold together. An income statement also shows the effectiveness of the strategies set by the firm at the start of the financial period.
Cash Flow Statement
The purpose of the cash flow statement is to determine the source of a firm’s cash (cash inflow) and where it is being spent (cash outflow) over a given period. It helps in analyzing the liquidity and long-term solvency of a firm (Robinson, 2020). The cash flow uses a cash basis accounting basis rather than accrual basis accounting. This is because a company may accrue accounting revenue but not actually receive the cash. This may help generate profits and taxes payable but not provide resources to stay solvent.
Financial Statement of Tesla/TSLA Inc. Corporation Company
Tesla, Inc. is an American electric vehicle and clean energy company situated in Palo Alto, California, United States. It mainly deals with designing, manufacturing, selling, and leasing electric vehicles and energy generation and storage systems, which are distributed to the rest of the world. The following are the quarterly financial statement reports for the year 2020/21 of the company.
The firm had sales of $11958 for the period ending 30 June 2021. The cost of manufacturing their products was $9074, leading to a gross profit of $2884. The firm had a total expense of $10646, leading to an operating profit of $1312. After deducting, the interest expense and other net or $15 and $4 respectively, the company had a profit before tax of $1293. After the deduction of income taxes of $115, the company had a net profit of $1178 (Tesla Inc, 2021). The firm also paid dividends to the firm owners of $36, leaving $1142 which, eventually increased retained earnings in the balance sheet.
The balance sheet data for Tesla Inc. Company shows the firm had begun the year with $45691 and by Jun 2021 recorded $55146. Most of the assets were invested in Property, Plant, and Equipment, amounting to $21990 in 2020 and $27030 in 2021. Investment inventories were $4218 and $4733 in 2020 and 2021, respectively (Tesla Inc, 2021). It was in these two accounts that a significant part of the growth of the firm’s assets occurred.
It is evident that the free cash flows are negative in the investing activities by $4097, while $3765 was generated from the operative activities. This means that lots of the finances were channeled towards net operating capital and investment in long-term assets. If the firm could continue investing in assets yet it had less income from operative activities, it appears the firm received funds from investors.
Calculating Financing Cash Flows=+– debt principal+– stock- interest payments to creditors- dividends paid to stockholders
Financial Position of the Company
Tesla posts record net income of $438 million, revenue surges by 74% Tesla reported record net income of $438 million during the quarter, as well as earnings of 93 cents per share on $10.39 billion in revenue. As shown in the balance sheet, the company had total net assets of $55146, total liabilities of $30342, and total equity of $24804 (Tesla Inc, 2021). This indicates that the company’s financial position was better, and the many investors were willing to invest in the company, as seen in the increase of investment inventories from $4218 to $4733 in 2020 to 2021, respectively.
The financial position of a company is determined by its balance sheet, income statement, and cash flow. Therefore, the knowledge of these three components will help the management determine the financial status, results of the company’s activities, and cash movement within the firm, thus making the right decisions towards investment and managing the organization.
Robinson, T. R. (2020). International financial statement analysis. John Wiley & Sons.
Tesla Inc.2021, Annual Financial Statement Release.