Question

Required a. As this chapter explained, many companies that report net losses on their earnings statements re- port positive cash flows from operating activities. How do Tesla's net incomes compare to its cash b. Based only on the information in the statements of cash flows, does Tesla appear to be growing c. In 2013 Tesla paid off $452.3 million on Department of Energy (DOE) loans and $8.4 million of d. All things considered, based on the information in its statements of cash flows, does Tesla's cash flows from operating activities? the capacity of its business? Explain. capital leases and other debt. Where did it get the funds to repay this debt? position appear to be improving or deteriorating?

Answer 1

a) The cash flow statement shows the positive operating cash flows even though there is a net loss because of the following reasons;

1) Net loss is added back by non cash expenses and non operating expenses which decreases the negative value and increases positive value in the Cash flows from operating activities.

2) And next the same value is added or reduced by changes in working capital. Here when there is less sales there may be amount received from debtors which increases the cash in flow in operating activities.

3) At the same time even though there is more purchases there may be more credit purchases and payment made to those creditors is less which increases the operating activities.

4) Increase in other long term liabilities also increase the Cash inflow from operating activities.

b) Based on the information in the statement of cash flow we can say the Tesla is grown from 2012 to 2013 as there is a 4 times increase in cash in flows. It shows that the capacity of the Tesla is growing.

Year	2011	2012	2013
Cash flows	$ 255,266	$ 201,890	$ 845,889

c) Even though we have paid DOE loan, Capital lease loan and other debts we have received cash in flows from following sources which are used in payment of the above loans and other debts.

Source of inflow for cash	Amount , (thousand $'s)
1) Proceeds from convertible debentures	660,000
2) Proceeds from issuance of common stock	360,000
3) Proceeds from issuance of warrants	120,318
4) Proceeds from exercise of stock option	95,307
5)Proceeds from issuance of common stock in private placement	55,000
Total cash in flows	1,290,625

d) According to the cash flow statements given above the cash position of the Telsa company is declined from 2011 ($ 255,266) to 2012 ($ 201,890) and the cash position was greatly improved to 2013 ($ 845,889).