Question

Question 2: Create a common-size income statement and use the difference (2017-2016) to comment on the following items (10 points)
Items	Comments
1. Automotive revenue	Write your comments here
2. Income (loss) before income taxes
3. Interest expense
4. Net Income (loss)
Exchange rate used is that of the Year End reported date
As Reported Annual Income Statement
Report Date	12/31/2017	12/31/2016		12/31/2017	12/31/2016
Currency	USD	USD
Audit Status	Not Qualified	Not Qualified
Consolidated	Yes	Yes
Scale	Thousands	Thousands		%	%	Difference (2017-2016)
Development services revenue	-	-
Automotive revenue	8534752	5589007
Automotive leasing revenue	1106548	761759
Total automotive revenue	9641300	6350766
Energy generation & storage revenue	1116266	181394
Services & other revenues	1001185	467972
Total revenues	11758751	7000132
Development services revenue	-	-
Automotive cost of revenue	6724480	4268087
Automotive leasing cost of revenue	708224	481994
Total automotive cost of revenues	7432704	4750081
Energy generation & storage cost of revenue	874538	178332
Services & other cost of revenues	1229022	472462
Total cost of good solds	9536264	5400875
Gross profit (loss)	2222487	1599257
Research & development	1378073	834408
Selling, general & administrative	2476500	1432189
Total operating expenses	3854573	2266597
Income (loss) from operations	-1632086	-667340
Interest income	19686	8530
Interest expense	471259	198810
Other income (expense), net	-125373	111272
Income (loss) before income taxes - domestic	-993113	-130718
Noncontrolling interest & redeemable noncontrolling interest	-279178	-98132
Income (loss) before income taxes - international	-936741	-517498
Income (loss) before income taxes	-2209032	-746348
Current federal income taxes (benefit)	-9552	-
Current state income taxes (benefit)	2029	568
Current foreign income taxes (benefit)	42715	53962
Current income taxes (benefit)	35192	54530
Deferred foreign income taxes (benefit)	-3646	-27832
Deferred income taxes (benefit)	-3646	-27832
Provision for income taxes (benefit)	31546	26698
Net income (loss)	-2240578	-773046
Net loss attributable to noncontrolling interests & redeemable noncontrolling interests	279178	98132
Net income (loss) attributable to common stockholders	-1961400	-674914
Weighted average shares outstanding-basic	165758	144212
Weighted average shares outstanding-diluted	165758	144212
Year end shares outstanding	168797	161561
Net income (loss) per share - basic	-11.83	-4.68
Net income (loss) per share - diluted	-11.83	-4.68
Number of full time employees	37543	30025
Number of common stockholders	1156	1109
Foreign currency translation adjustments	62658	-18500
						Question 3: Compute these ratios (10 points) (Note: Don’t do the calculation by hand or by using regular calculator. You need to use formulas in Excel. Look at my calculation for the current ratio in 2017 as an example 2017 2016 Difference (2017-2016) Current ratio Current ratio Total Debt ratio Inventory turnover Profit margin ROA ROE Comments on these ratios. Do you think Tesla's stock is a good investment, why?

Answer 1

Solution:-

Question 2:-

Common-size income statement:-

common-size income statement
Report Date	12/31/2017	12/31/2016		12/31/2017	12/31/2016
Scale	Thousands	Thousands		%	%	Difference (2017-2016)
Development services revenue	-	-
Automotive revenue	8534752	5589007		100%	100%	0%
Automotive leasing revenue	1106548	761759		13%	14%	1%
Total automotive revenue	9641300	6350766		113%	114%	1%
Energy generation & storage revenue	1116266	181394		13%	3%	-10%
Services & other revenues	1001185	467972		12%	8%	-3%
Total revenues	11758751	7000132		138%	125%	-13%
Development services revenue	-	-				0%
Automotive cost of revenue	6724480	4268087		79%	76%	-2%
Automotive leasing cost of revenue	708224	481994		8%	9%	0%
Total automotive cost of revenues	7432704	4750081		87%	85%	-2%
Energy generation & storage cost of revenue	874538	178332		10%	3%	-7%
Services & other cost of revenues	1229022	472462		14%	8%	-6%
Total cost of good solds	9536264	5400875		112%	97%	-15%
Gross profit (loss)	2222487	1599257		26%	29%	3%
Research & development	1378073	834408		16%	15%	-1%
Selling, general & administrative	2476500	1432189		29%	26%	-3%
Total operating expenses	3854573	2266597		45%	41%	-5%
Income (loss) from operations	-1632086	-667340		-19%	-12%	7%
Interest income	19686	8530		0%	0%	0%
Interest expense	471259	198810		6%	4%	-2%
Other income (expense), net	-125373	111272		-1%	2%	3%
Income (loss) before income taxes - domestic	-993113	-130718		-12%	-2%	9%
Noncontrolling interest & redeemable noncontrolling interest	-279178	-98132		-3%	-2%	2%
Income (loss) before income taxes - international	-936741	-517498		-11%	-9%	2%
Income (loss) before income taxes	-2209032	-746348		-26%	-13%	13%
Current federal income taxes (benefit)	-9552	-		0%		0%
Current state income taxes (benefit)	2029	568		0%	0%	0%
Current foreign income taxes (benefit)	42715	53962		1%	1%	0%
Current income taxes (benefit)	35192	54530		0%	1%	1%
Deferred foreign income taxes (benefit)	-3646	-27832		0%	0%	0%
Deferred income taxes (benefit)	-3646	-27832		0%	0%	0%
Provision for income taxes (benefit)	31546	26698		0%	0%	0%
Net income (loss)	-2240578	-773046		-26%	-14%	12%
Net loss attributable to noncontrolling interests & redeemable noncontrolling interests	279178	98132		3%	2%	-2%
Net income (loss) attributable to common stockholders	-1961400	-674914		-23%	-12%	11%

Comments:-

Items	Comment
1. Automotive revenue	Automotive revenue increased in 2017. This revenue may be increased due to price appreciation or due to Increase in sales units.
2. Income (loss) before income taxes	we look at the firm's net profit. Net profit Increased from 13 percent of sales to 26 percent of sales. That is a precipitous increase in one year.
3. Interest expense	Intrest expense increased from 4 percent of sales to 6 percent of sales. This indicates that company increase there loans
4. Net Income (loss)	we look at the firm's net profit. Net profit dropped from -12 percent of sales to -26 percent of sales. That is a precipitous decline in one year and, if the company has shareholders, will leave them questioning what went wrong. It is a clear signal to management that it needs to get a handle on the increasing cost of goods sold as well as the increased sales costs and administrative expenses. If there are any fixed assets that can be sold, management should consider selling them to lower both depreciation and interest expense on debt. This should help their common size income statement in 2017.