1. How do the following ratios tell the health of Tesla? (Please focus on the sa
ID: 2571334 • Letter: 1
Question
1. How do the following ratios tell the health of Tesla? (Please focus on the sales growth, net income growth, ROI, ROE, ROA, EPS, Current Ratio, and Quick Ratio)
sales growth past 3 years in %
- 2015: 26.50%
- 2016: 73.01%
- 2017:
Net income growth in %
- 2015: 0%
- 2016: 0%
- 2017: 0%
EPS
- 2015: -6.93%
- 2016: -4.68%
Please explain your answer!!!
1231/2015 USD (12.75) (88.84) 12/31/2016 03/31/2017 Compound Annual Growth Rate USD 8.37 65.80 11.67 USD (9.08) (50.06) (15.36) (12.14) 15.05 0.64 ,0 2.13 USD 3 Year USD (3.47) (22.56) (6.96) 5 Year ROA % (Net ROE % (Net) (5.61) (27.5) (61.85) (82.04) (82.64) 65.65 4.07 57.83 90.46 0.13 39.58 8.08 716.13 (0.61) (32.62) (0.96) (39.02) 0.13) (22.41) 37) (0.15) 0.02 0.07 (8.51) 113 22.85 0.67 1.07 (o.35) (0.58) 0.26 0.10 0.02 EBITDA Margin % Gross Margin % (4.29) 24.77 0.71 1.13 3.12 (9.72) 22.82 0.48 0.99 0.31) 0.03 0.19 0.08 2.22 (39.24) 9.86) (3.54) (31.T3) 40.97 32.50 1 T3) Current Ratio Net Current Assets % TA LT Debt to Equity Total Debt to Equity Total Asset Turnover (0.04) (0.99) 0.59 0.52 (0.02) (0.53) 1.26 1.5 0.45 (0.18) (0.17) 0.00 2.46 2.12 1.6 0.58 0.44 (0.16)Explanation / Answer
When we see the sales growth for Tesla, it shows a positive and substantial growth over the analysis horizon. This means that company has done well in terms of increasing its sales revenue over the period. However, when we see Gross margin, ROI & ROE, we don’t find them in line with sales revenue growth rate. This means that company’s profitability has taken a severe hit and it has decreased substantially. This is never a good sign for any company.
Furthermore, the net income has not seen any growth despite of having such a fantastic growth in Sales. This is again an alarming point, which means that company’s cost & expenses have increased substantially causing a flat bottom line.
Current ratio & Quick ratio over the period have not seen any significant change, so Tesla can relax on this point, however, it must compare it with its industry standards and come to a conclusion accordingly.
EPS has witnessed a negative growth despite of flat bottom line. This means that company’s stake has diluted over the period with no growth in Net Income, which is not a favorable thing for stakeholders.
Overall, we can conclude that Tesla is not doing good and it must take improvement measures to better its current position with a major focus on factors affecting its profitability.
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