GBSB Global Business School

CO119 – Financial Strategies for Business Development (Online)

Professor Belkis M. Reyes-Fernandez

Spring 2022

Assignment 2

Business Decision: Study and analyze Tesla Inc. and find their published 2021 Income

Statement, Statement of Changes in Equity and Cash Flow statement

Aml Mohammed Miftah Albarghouti

Introduction
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 This paper will discuss the the financial condition of the Tesla using and analyzing the

consolidated Statement of Operation (Appendix 1), Statement of Changes in Equity (Appendix

2) and Cash Flow statement (Appendix 3) extracted from the Tesla 10 K annual report 2021. The

analysis will be conducted vertically highlighting the largest accounts an investor would look at

to assess the financial situation of Tesla within period 2020 vs 2021. For some accounts, I will be

applying some mathematical analysis (underlined) in order to gain a closer eye on the financial

situation.

In addition, a summary on Tesla’s financial performance over the indicated period and

based on the results from ratios analysis will be given in conclusion.

Statement of income (2021 vs. 2020)- (Appendix 1)

According to the company’s statement of P&L (appendix 1), Tesla has made a dramatic

growth during 2021. This huge variation was reflected in the automotive revenues

account forming 87 % of its total. This rising trend had made the company explains the

fat profit in their annual report notes, (page 56), which is “increasing the average selling

vehicles and decreasing the manufacturing costs that led to growth of COGS among other

factors”.

Gross profit of $13.606B, a 105.22% increase from 2020; a 62.94% increase from 2019

with $4.069B. With the Gross profit margin, COGS average 21.02% for 2020 cycle,

while 25.2% for 2021, which is a good sign explains the company’s increasing chance to

reinvest, save or pay expenses.

Moreover, Tesla reported more than $ 7 billion of operating expenses, 34% rise from

2020, forming a 13.15 % of the company’s total revenue. Research views Tesla’s

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 operating expenses; specifically selling and general administration account expenses, as

growing in the last six years, on an average of “30 % year-over-year since 2016” (Stock

Dividend Screener, 2022). This shall affect the company’s profitability. However,

operating expenses ratio to the net sales indicated 52 % in 2021, 70% in 2020 and 101 %

in 2019. The ratio has been on a decline which is a good sign.

Upholding the latter point, Tesla’s EBIT for 2021 was dramatically increased by

227.13% from 2020; $1,154B. The operating profit margin 12 % for 2021 cycle,

comparing to 2020 with 6.3 %, resulting in $5.52B net income for 2021 after cutting the

interest and taxes expenses, a humongous increase by 665% compared to $721 million in

2020.

Viewing 2021, selling $ 53,823B, Tesla has produced 5.52B net earnings that shall be

distributed to the shareholders. The margin net income for 2020 is 2.8% while increased

by the ending year 2021 to be 10%.

Finally, studying Tesla earnings per share for 2021 is $4.90 reflected in a 665.62%

increase from 2020 ($0.64).

Statement of change of Equity (2021 vs. 2020)

Total shareholder’s equity for 2021 was $ 31015B, a 34.4 increase from 2020; $

23075B,

$ 7,940B is the net variation from December 2020 to 2021. Within that net change, there

are several large line items that affected equity in different directions. Net income in

2021 made equity go up by $5,601B, a 569% increase from 2020. Distributions to

noncontrolling interests 2021 decreased the equity by $106B, and $132B in 2020.

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 The adoption of new accounting standard (Tesla annual report 2021) affected negatively

the historical balance of equity.

Finally, the return on equity ratio is 17% for 2021, an increase from the previous year

where ratio was 3%. This indicates how efficient is the managing of equity provided by

the shareholders.

Statement of Cash flow (2021 vs. 2020)

From operating activities, Tesla has generated $11,497B cash inflow net earnings; from

selling automobile vehicles, the company’s core business. It represents a 95.4% increase

from 2020. A key factor in this account is the working capital. There is a growth in the

working items on the assets side on the balance sheet; the more assets grow, the more

cash linked to them. There is growth in both inventories and operating lease vehicles, so

Tesla had a cash outflow of these accounts of $2,115B for 2021 an 14% increase from

2020. On the other hand, working capital on liability items of account payable has grown

harder in 2021 than in 2020 which is a positive number.

Cash outflow from investment activities has grown dramatically in 2021 by 151.21; $-

7.868B from 2020. 89% of this increase comes from the Purchasing of Property account.

This huge variation as described in Stock Dividend Screener 2022, was a result of the

company’s recent launching of new factory Gigafactory in Berlin Germany.

Cash inflow form financial activities increased from 2019 to 2020, but then declined in

2021 by 20.89% from 2020. The company made $12.269B cash inflow from issuing

equity in 2020, while nothing for 2021. $5.284B in 2021 and $1.910B in 2020 as the net

cash inflow between proceeds and repayments of convertible and other debt. In total,

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 Tesla still have a cash inflow from financing activities in 2021, but not as big as funding

of 2020.

A more comparison between Tesla’s cash outflow and inflow will give more details

about the situation. By abstracting the capital expenditure from the operating cash flow,

result shows that Tesla’s free cash flow for 2021was $ 3,483M, almost a 29% increase

from the 2020. In its annual report, Tesla looks at its expenditure as an investment.

According to Carlier 2022, this positive number is a result of the new investment by

Tesla to open a factory in during Q4 2021; Berlin Germany during Q4 2021, which

driven up expenditure.

Conclusion

Analyzing the income statement and applying operating expenses ratio and margin net

earnings per share indicates Tesla’s strong financial numbers and profitability. Tesla’s

operations have turned positive, which reflects in positive retained earnings. Also, a good

benchmark in the income statement to measure the profitability by calculating earnings

per share; and that is what an investor would love to see going big.

Numbers in the change of equity statement shows that the business can maximize the

investor’s wealth. Tesla has a much healthier debt-to-equity ratio.

Reviewing the burn and reverse cash, Tesla demonstrates positivity of cash flow;

meaning the ability to cover its expenses in the near term. The company is bringing in

more cash than it spends, which is a good value. Also, Tesla is opening new investments;

Berlin factory which more likely to lead to future growth. This is reflected on the results

the free cash ratio, which point out that the company can pay its debts, contribute to

growth, satisfy its shareholders and have a potential for a successful future.

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References

Inc., Tesla (2021). Tesla Inc. ANNUAL REPORT For the fiscal year ended December 31, 2021.

10-K. Retrieved April 27, 2022, from

https://www.sec.gov/Archives/edgar/data/1318605/000095017022000796/tsla-

20211231.htm#item_8_financial_statememts_supplementar

Carlier, M. (2022, February 2). Tesla's quarterly cash flow less capex 2021. Statista. Retrieved

May 19, 2022, from https://www.statista.com/statistics/1064216/free-cash-flow-of-tesla-

by-quarter/  

Stock Dividend Screener, 2022. Tesla operating expenses and cost breakdown.

stockdividendscreener.com. Retrieved May 18, 2022, from

https://stockdividendscreener.com/auto-manufacturers/tesla-quarterly-operating-expenses/ 

Stock Dividend Screener, 2022– cash on hand and free cash flow. stock dividend screener.

Retrieved May 19, 2022, from https://stockdividendscreener.com/auto-manufacturers/tesla-

cash-position/

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Appendix 1

 Tesla, Inc.
 

Consolidated Statements of Operations

(in millions, except per share data)
 
    Year Ended December 31,  
    2021    2020    2019  
Revenues                
Automotive sales   $ 44,125     $ 24,604     $ 19,358  
Automotive regulatory credits     1,465       1,580       594  
Automotive leasing     1,642       1,052       869  
Total automotive revenues     47,232       27,236       20,821  
Energy generation and storage     2,789       1,994       1,531  
Services and other     3,802       2,306       2,226  
Total revenues    53,823       31,536       24,578  
Cost of revenues                
Automotive sales     32,415       19,696       15,939  
Automotive leasing     978       563       459  
Total automotive cost of revenues     33,393       20,259       16,398  
Energy generation and storage     2,918       1,976       1,341  
Services and other     3,906       2,671       2,770  
Total cost of revenues    40,217       24,906       20,509  
Gross profit    13,606       6,630       4,069  
Operating expenses                
Research and development     2,593       1,491       1,343  
Selling, general and administrative     4,517       3,145       2,646  
Restructuring and other     (27 )     —      149  
Total operating expenses    7,083       4,636       4,138  
Income (loss) from operations    6,523       1,994       (69 )
Interest income     56       30       44  
Interest expense     (371 )     (748 )     (685 )
Other income (expense), net     135       (122 )     45  
Income (loss) before income taxes    6,343       1,154       (665 )
Provision for income taxes     699       292       110  
Net income (loss)    5,644       862       (775 )
Net income attributable to noncontrolling
interests and
   redeemable noncontrolling interests in
subsidiaries     125       141       87  
Net income (loss) attributable to common
stockholders  $ 5,519     $ 721     $ (862 )
                 

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Net income (loss) per share of common stock
   attributable to common stockholders                
Basic  $ 5.60     $ 0.74     $ (0.98 )
Diluted  $ 4.90     $ 0.64     $ (0.98 )
Weighted average shares used in computing net
   income (loss) per share of common stock                
Basic    986       933       887  
Diluted    1,129       1,083       887  
 

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Appendix 2

Accumulate (Accumulat
                        d    ed                  
Addition Noncontrolli
    Redeemable                 alOther       Deficit)     Total       ng   
Noncontrolli Comprehens Stockholde
    ng       Common Stock     Paid-In     ive     Retained     rs'     Interests in     Total  
Share Amou (Loss)
    Interests       s     nt     Capital     Income     Earnings     Equity     Subsidiaries     Equity  
 
Balance as
of December
31, 2019   $ 643         905     $ 1     $ 12,736     $ (36 )   $ (6,083 )   $ 6,618     $ 849     $ 7,467  
Adjustments
for prior
periods from
adopting
ASU 2016-
13     —        —      —      —      —      (37 )     (37 )     —     (37 )
Reclassificati
on between
equity and
mezzanine
equity for
convertible
senior
   notes     —        —      —      (51 )     —      —      (51 )     —     (51 )
Exercises of
conversion
feature of
convertible
senior notes     —        2      0      59       —      —      59       —     59  
Issuance of
common
stock for
equity
incentive
awards     —        19       0      417       —      —      417       —     417  
Issuance of
common
stock in
public
offerings, net
of issuance 12,26
costs of $68     —        34       0       12,269       —      —      12,269       —     9 
Stock-based
compensatio
n     —        —      —      1,861       —      —      1,861       —       1,861  
Contribution
s from
noncontrollin
g interests     7        —      —      —      —      —      —     17       17  
Distributions
to
noncontrollin
g interests     (67 )       —      —      —      —      —      —     (132 )     (132 )
Buy-outs of
noncontrollin
g interests     (4 )       —      —      (31 )     —      —      (31 )     —     (31 )
Net income     25         —      —      —      —      721       721       116       837  
Other
comprehensi
ve income     —        —      —      —      399       —      399       —       399  
Balance as   $ 604         960     $ 1     $ 27,260     $ 363     $ (5,399 )   $ 22,225     $ 850     $ 23,07  

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of December
31, 2020 5
Adjustments
for prior
periods from
adopting
ASU 2020-
06     —        —      —      (474 )     —      211       (263 )     —     (263 )
Exercises of
conversion
feature of
convertible
senior notes     —        1      0      6      —      —      6     —     6 
Settlements
of warrants     —        37       0      —      —      —      —     —     — 
Issuance of
common
stock for
equity
incentive
awards     —        35       0      707       —      —      707       —     707  
Stock-based
compensatio
n     —        —      —      2,299       —      —      2,299       —       2,299  
Contribution
s from
noncontrollin
g interests     2        —      —      —      —      —      —     —     — 
Distributions
to
noncontrollin
g interests     (66 )       —      —      —      —      —      —     (106 )     (106 )
Buy-outs of
noncontrollin
g interests     (15 )       —      —      5      —      —      5     —     5 
Net income     43         —      —      —      —      5,519       5,519       82       5,601  
Other
comprehensi
ve loss     —        —      —      —      (309 )     —      (309 )     —     (309 )
Balance as
of December 1,03 31,01
31, 2021   $ 568         3    $ 1     $ 29,803     $ 54     $ 331     $ 30,189     $ 826     $ 5 

Appendix 3

Tesla, Inc.
Consolidated Statements of Cash Flows
(in millions)
 
    Year Ended December 31,  
    2021    2020    2019  

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Cash Flows from Operating Activities                 
Net income (loss)   $ 5,644     $ 862     $ (775 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:                
Depreciation, amortization and impairment     2,911       2,322       2,154  
Stock-based compensation     2,121       1,734       898  
Inventory and purchase commitments write-downs     140       202       193  
Foreign currency transaction net unrealized (gain) loss     (55 )     114       (48 )
Non-cash interest and other operating activities     245       525       520  
Digital assets gain, net     (27 )     —      — 
Operating cash flow related to repayment of discounted convertible
senior notes     —      —      (188 )
Changes in operating assets and liabilities:                
Accounts receivable     (130 )     (652 )     (367 )
Inventory     (1,709 )     (422 )     (429 )
Operating lease vehicles     (2,114 )     (1,072 )     (764 )
Prepaid expenses and other current assets     (271 )     (251 )     (288 )
Other non-current assets     (1,291 )     (344 )     115  
Accounts payable and accrued liabilities     4,578       2,102       646  
Deferred revenue     793       321       801  
Customer deposits     186       7      (58 )
Other long-term liabilities     476       495       (5 )
Net cash provided by operating activities     11,497       5,943       2,405  
Cash Flows from Investing Activities                
Purchases of property and equipment excluding finance leases, net of sales     (6,482 )     (3,157 )     (1,327 )
Purchases of solar energy systems, net of sales     (32 )     (75 )     (105 )
Purchases of digital assets     (1,500 )     —      — 
Proceeds from sales of digital assets     272       —      — 
Purchases of marketable securities     (132 )     —      — 
Receipt of government grants     6      123       46  
Purchase of intangible assets     —      (10 )     (5 )
Business combinations, net of cash acquired     —      (13 )     (45 )
Net cash used in investing activities     (7,868 )     (3,132 )     (1,436 )
Cash Flows from Financing Activities                
Proceeds from issuances of common stock in public offerings, net of
issuance costs     —     12,269       848  
Proceeds from issuances of convertible and other debt     8,883      9,713       10,669  
Repayments of convertible and other debt     (14,167 )    (11,623 )     (9,161 )
Collateralized lease repayments     (9 )    (240 )     (389 )
Proceeds from exercises of stock options and other stock issuances     707      417       263  
Principal payments on finance leases     (439 )    (338 )     (321 )
Debt issuance costs     (9 )    (6 )     (37 )
Purchase of convertible note hedges     —     —      (476 )
Proceeds from issuance of warrants     —     —      174  
Proceeds from investments by noncontrolling interests in subsidiaries     2     24       279  
Distributions paid to noncontrolling interests in subsidiaries     (161 )    (208 )     (311 )
Payments for buy-outs of noncontrolling interests in subsidiaries     (10 )    (35 )     (9 )
Net cash (used in) provided by financing activities     (5,203 )     9,973       1,529  
Effect of exchange rate changes on cash and cash equivalents and
restricted cash     (183 )     334       8 
Net (decrease) increase in cash and cash equivalents and restricted cash     (1,757 )     13,118       2,506  
Cash and cash equivalents and restricted cash, beginning of period     19,901       6,783       4,277  
Cash and cash equivalents and restricted cash, end of period   $ 18,144     $ 19,901     $ 6,783  
Supplemental Non-Cash Investing and Financing Activities                
Equity issued in connection with business combination   $ —   $ —   $ 207  
Acquisitions of property and equipment included in liabilities   $ 2,251     $ 1,088     $ 562  
Supplemental Disclosures                  

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Cash paid during the period for interest, net of amounts capitalized   $ 266    $ 444    $ 455  
Cash paid during the period for taxes, net of refunds   $ 561    $ 115    $ 54  
 

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