Question

June 30, December 31, 2018 2019 S $ 4,954,740 128,006 1,147,100 3,382,358 569,748 10,181,952 2,069,540 6,200,704 10,082,458 1,248,277 327,358 153,475 400,308 365,547 842,978 31,872,597 3,685,618 192,551 949,022 3,113,446 365,671 8,306,308 2,089,758 6,271,396 11,330,077 282,492 68,159 421,548 398,219 571,657 29,739,614 $ $ $ $ Assets Current assets Cash and cash equivalents Restricted cash Accounts receivable, net Inventory Prepaid expenses and other current assets Total current assets Operating lease vehicles, net Solar energy systems, net Property, plant and equipment, net Operating lease right-of-use assets Intangible assets, net Goodwill MyPower customer notes receivable, net of current portion Restricted cash, net of current portion Other assets Total assets Liabilities Current liabilities Accounts payable Accrued liabilities and other Deferred revenue Resale value guarantees Customer deposits Current portion of long-term debt and finance leases Total current liabilities Long-term debt and finance leases, net of current portion Deferred revenue, net of current portion Resale value guarantees, net of current portion Other long-term liabilities Total liabilities Commitments and contingencies (Note 15) Redeemable noncontrolling interests in subsidiaries Equity Stockholders' equity Preferred stock; $0.001 par value; 100,000 shares authorized; no shares issued and outstanding Common stock; $0.001 par value; 2,000,000 shares authorized; 179,118 and 172,603 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders' equity Noncontrolling interests in subsidiaries Total liabilities and equity 3,133,587 2,622,943 883,293 526,758 631,107 1,791,085 9,588,773 11,234,401 1,182,042 61,200 2,655,720 24,722,136 3,404,451 2,094,253 630,292 502,840 792,601 2.567,699 9,992,136 9,403,672 990,873 328,926 2,710,403 23,426,010 580,227 555,964 179 12,052,458 (5,605) (6,331,639) 5,715,393 854,841 31,872,597 173 10,249,120 (8,218) (5,317,832) 4,923,243 834,397 29,739,614

a.) What is a significant change in the composition of current assets or current liabilities.

b.) Evaluate Tesla's debt paying ability

Answer 1

(a):

	2019	2018		$ change	% change
Cash and equivalents	4,954,740	3,685,618		1,269,122	34.43%
Restricted cash	128,006	192,551		-             64,545	-33.52%
Accounts receivable	1,147,100	949,022		198,078	20.87%
Inventory	3,382,358	3,113,446		268,912	8.64%
Prepaid expenses	569,748	365,671		204,077	55.81%
Total current assets	10,181,952	8,306,308		1,875,644	22.58%
Accounts payable	3,133,587.00	3,404,451.00		-           270,864	-7.96%
Accrued liabilities and other	2,622,943.00	2,094,253.00		528,690	25.24%
Deferred revenue	883,293.00	630,292.00		253,001	40.14%
Resale value guarantees	526,758.00	502,840.00		23,918	4.76%
Customer deposits	631,107.00	792,601.00		-           161,494	-20.38%
Current portion of long term debt	1,791,085.00	2,567,699.00		-           776,614	-30.25%
Total current liabilities	9,588,773.00	9,992,136.00		-           403,363	-4.04%

From the above analysis we can see that Tesla’s total current assets increases by 22.58% in 2019 and this was mainly due to 55.81% increase in its prepaid expenses and 34.43% increase in its cash and cash equivalent balance. The company’s restricted cash declined by 33.52%.

The company’s total current liabilities declined by 4.04% in 2019 and this can be mainly attributed to 30.25% decline in current portion of long term debt, 20.38% decline in customer deposits balance and 7.96% decline in accounts payable balance.

(b):

	2019	2018
Total liabilities	24,722,136	23,426,010
Total assets	31,872,597	29,739,614
Debt ratio	0.7757	0.7877

The company’s debt paying ability can be determined using the debt ratio. Debt ratio = total liabilities/total assets

We can see that the company's debt ratio declined in 2019 to 0.7757 from 0.7877 in 2018. This means that the company has financed less assets through debt in 2019 and hence it has become easier for the company to pay down debt.