Question

Compute and Interpret Liquidity and Solvency Ratios

Selected balance sheet, income statement and cash flow statement information from Tesla, Inc. for 2017 and 2016 follows ($ thousands).

December 31	2017	2016
Cash and cash equivalents	$3,701,247	$3,726,549
Restricted cash	156,545	106,741
Net receivables	515,381	499,142
Inventory	2,263,537	2,067,454
Other current assets	268,365	194,465
Current assets	6,905,075	6,594,351
Current liabilities	7,674,670	5,827,005
Total liabilities	23,022,980	16,750,167
Stockholders' equity	5,965,725	6,247,242

Year ended December 31,	2017
Loss before income taxes	$(2,209,032)
Interest expense	504,592
Cash flows from operating activities	(59,432)
Capital expenditures	(3,748,147)

a. Compute the current ratio and quick ratio for each year.

Note: Round answers to two decimal places.

	2017	2016
Current ratio	Answer 0.9	Answer 1.13
Quick ratio	Answer	Answer

b. Compute the debt-to-equity ratio for 2017 and 2016 and the times-interest-earned ratio for 2017.

Note: Round answers to two decimal places. Use a negative sign with your answer, if appropriate.

	2017	2016
Debt-to-equity ratio	Answer 3.86	Answer 2.68
Times interest earned ratio	Answer

c. Compute the cash burn rate for 2017.

Note: Round answer to the nearest whole number. Use a negative sign with your answer, if appropriate.

$Answer

  thousand per day

Answer 1

current ratio	current assets / current liabilities
	2017 ($'000)	2016 ($'000)
total current assets	69,05,075	65,94,351
total current liabilities	76,74,670	58,27,005
current ratio	0.90	1.13
quick ratio	quick assets / current liabilities
	2017 ($'000)	2016 ($'000)
cash and cash equivalents	37,01,247	37,26,549
restricted cash	1,56,545	1,06,741
net receivables	5,15,381	4,99,142
total quick assets	43,73,173	43,32,432
total current liabilities	76,74,670	58,27,005
quick ratio	0.57	0.74
debt-to equity ratio	total liabilities / total shareholders equity
	2017 ($'000)	2016 ($'000)
total liabilities	2,30,22,980	1,67,50,167
stockholders' equity	59,65,725	62,47,242
debt-to equity ratio	3.86	2.68
times interest earned ratio	EBIT / interest expense
	2017 ($'000)
loss before income taxes	-22,09,032
add:interest expense	5,04,592
EBIT	-17,04,440
times interest earned ratio	-3.38
cash burn rate	(cash balance in prior year - cash balance in current year)/12
	2017 ($'000)	2016 ($'000)
cash	37,01,247	37,26,549
restricted cash	1,56,545	1,06,741
cash balance	38,57,792	38,33,290
cash burn	-2,042