Financial Paper

Financial Statement Analysis Project

	Tesla Motors (In thousands)58384199	General Motors LLC (In Millions)
P/E ratio	240.01/-6.76= -35.5	34.01/6.06= 5.6
Debt to equity ratio	6,961,471/1,088,944= 6.39	154,197/40,323=3.824
Current ratio	2,791,568/2,816,274=.991	78,007/71466= 1.09
Quick Ratio	1,196,908 +22,628 + 168,965/2,816,274=.493	15,238+8,163+8,337/ 71,466= .444
Earnings Per Share	-888,663/ 131,425= -6.76	9,615/1,586=6.06

The automotive sector is very interesting, especially the way different companies do business and reach consumers, that is why I chose Tesla Motors and General Motors as the companies to evaluate. Tesla is an American based automaker of whom, producing energy storage units as well. They were founded in 2003 by five men, one that may be the most recognizable is, Elon Musk who is the Chairman and CEO. Tesla since 2003, has came out with couple different models of cars that have attracted different consumers from all different scopes. In relation, General Motors LLC has done the same. Their headquarters is in Detroit, Michigan but they produce vehicles in many different countries. They were initially founded in 1908 but had since restructured themselves in 2009, after bankruptcy in which they were General Motors

Corporation. They also contain twelve different brands that are under the umbrella of General Motors that include: Chevrolet, GMC, and Cadillac.

Looking through Tesla’s financial statements and calculating the ratios, it seems Tesla isn’t the best company to invest in based on 2015’s numbers. For example, the P/E ratio is -35.5.

This essentially means that Tesla is losing money because their expenses outweigh their revenues. So when you take the market price, which is fairly high for an automotive company over the negative earning per share that is how you get a number such as the one above. To bring it all together, Tesla has shown that their performance relative to the relationship between their income and success in the stock market have been subpar. Tesla’s debt-to-equity ratio is 6.39. This is calculated by taking the total liabilities over the total equity. This relationship is used to to see the leverage or the liquidity of a company. Going off Tesla’s 6.39, it shows that creditors have about 6 times more stake in the company than what has been put in the company. The current ratio of Tesla is, .991. This is another liquidity ratio and it shows that they have a little bit more assets than liabilities. It also shows that Tesla has the ability to pay back some obligations, but not many since the number isn’t that high. Tesla has a quick ratio of .493, which states the short term liquidity of Tesla because it deals with readily available assets such as cash over their current liabilities. We can also find that Tesla has about 50 cents to cover each dollar of current liabilities. Tesla’s earning-per-share (EPS) is -6.76. This means that Tesla is not profitable in which their expenses outweigh their revenues. The negative 6.76 decreases the value of Tesla and sometimes the value of the stock.

General Motors LLC has been around for a long time and their financial statements reflect so. GM’s P/E ratio is 5.6, which was calculated by the market price of 34.01 divided by the EPS which is 6.06. This ratio is low compared to the market but this number tells us what investors are willing to pay per dollar of the GM’s earnings which in this case, they would be willing to pay $5.60 for every $1 of earnings or less. GM’s debt-to-equity number came out to be 3.824. This means that GM has been taking on a lot of debt which makes them very risky. But if

GM was in the process of increasing operations like building a manufacturing building that could raise the liabilities over several years, but could be beneficial in the long run. Conversely, in the current, GM’s current ratio is 1.09. This means that GM doesn’t have much flexibility in paying short term and long term obligations because their current assets and current liabilities are very similar. The quick ratio is cash, marketable securities, and accounts receivable over current liabilities. GM’s quick ratio number came out to be .44. This means that GM has $.44 of liquid assets available for each $1 of current liabilities. GM’s number is average, I’m sure they would like to have it above the .5 marker. The higher the number, the more liquid they would be. GM’s earning-per-share is 6.06. Which means that if GM gave every dollar of their income to shareholders they would receive about 6 dollars for each share. This ratio is most telling to the profitability of the company which serves as one of the most popular ratios to do so. Tesla Motors and General Motors both serve consumers with automotive units but it’s easy to see that they don’t both reach the same numbers, and that’s the great thing about competition. So I want to compare these competitors ratios, starting with the P/E ratio, Tesla since they have a negative income this makes their ratio negative and very unattractive if your not paying attention to the long term success of the company, while GM has a positive P/E ratio that low but they are safe company because they have a positive P/E ratio of 5.6. Concerning the debt-to-equity ratio, Tesla 6.39, that is very high compared to other companies because it states they have 6 times more liabilities than equity. GM’s is 3.829, it is also fairly high but it could be because they have a high amount of assets. GM’s definitely better compared to Tesla’s high debt-to-equity ratio. Tesla’s current ratio number being just under 1 is quite frightening because they will have a hard time paying for current liabilities. While GM’s is just over 1 which still tells us that they are going to have a hard time with current liabilities because they both have similar current assets and liabilities, respectively. Tesla and General Motors have almost equal quick ratio number, at just over .4. This probably means that the automotive sector as a whole is not very liquid because they don’t have a lot of current assets to match their current liabilities. In contrast, Tesla and General Motors have very opposite numbers when it comes their earning-pershare. Tesla has a negative 6.76 because they aren’t profitable as a company while General Motors has a positive 6.06 because they are profitable. As one can see, these companies have their similarities and differences as any company would, but the fact Tesla lack profitability, is the major reason why they have their differences.

Works Cited

"EDGAR | Company Filings." SEC.gov | Company Search Page. N.p., n.d. Web. 26 Nov. 2016.

"Yahoo Finance - Business Finance, Stock Market, Quotes, News." Yahoo Finance - Business

Finance, Stock Market, Quotes, News. N.p., n.d. Web. 26 Nov. 2016.

Porter, Gary A., and Curtis L. Norton. Using Financial Accounting Information: The Alternative to Debits and Credits. Mason, OH: Thomson/South-Western, 2008. Print.