Following the cash

Tesla Motors Company, Inc. began operations in 2003 but did not begin selling its stock to the public until June 28, 2010. It has lost money every year it has been in existence, and by December 31, 2013, it had total lifetime losses of approximately $1.1 billion. The company makes the Tesla Model S, and it supplies electric car components to Daimler and Toyota. Tesla's statements of cash flows for 2011, 2012, and 2013 follow.

For the years ended December 31

2013 2012 2011

Cash flows from operating activities:

Net loss $(74,014) $(396,213) $(254,411)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 106,083 28,825 16,919

Stock-based compensation 80,737 50,145 29,419

Amortization of discount on convertible debt 9,143 - -

Inventory write-downs 8,918 4,929 1,828

Write-off of Department of Energy (DOE) loan origination costs 5,558 - -

Change in fair value of DOE warrant liabilities (10,692) 1,854 2,750

Other noncash operating activities 3,611 1,560 233

Foreign currency transaction gain 3,655 - -

Change in operating assets and liabilities

Account receivables (21,917) (17,303) (2,829)

Inventories and operating lease vehicles (463,270) (194,726) (13,638)

Prepaid expenses and other current assets (17,466) 1,121 (248)

Other assets (342) (482) (288)

Accounts payable (243) 187,821 19,891

Accured liabilities 66,567 9,603 10,620

Deferred revenue 268,153 (526) (1,927)

Customer deposits 24,243 47,056 61,006

Resale value guarantee 236,299 - -

Other long-term liabilities 32,971 10,255 2,641

Net cash provided by (used in) operating activities 257,994 (266,081) (128,034)

Cash flows from investing activities:

Purchases of property and equipment excluding capital leases (264,224) (239,228) (184,226)

Withdrawals out of our dedicated DOE account, net 14,752 8,620 50,121

(Increase) decrease in other restricted cash 55 (1,330) (3,201)

Purchase of marketable securities - (14,992) (64,952)

Maturities of short-term marketable securities - 40,000 40,000

Net cash provided by investing activities (249,417) (206,930) (162,258)

Cash flows from financing activities:

Proceeds from convertible debt 660,000 - -

Proceeds from issuance of common stock in public offering 360,000 221,496 172,410

Proceeds from issuance of warrants 120,318 - -

Proceeds from exercise of stock options and other stock issuances 95,307 24,885 10,525

Proceeds from issuance of common stock in private placement 55,000 - 59,058

Principal payments on DOE loans (452,337) (12,710) -

Purchase of convertible note hedges (177,540) - -

Common stock and convertible debt issuance costs (16,901) - -

Principal payments on capital leases and other debt (8,425) (2,832) (416)

Proceeds from DOE loans - 188,796 204,423

Net cash provided by financing activities 635,422 419,635 446,000

Net increase (decrease) in cash and cash equivalents 643,999 (53,376) 155,708

Cash and cash equivalents at beginning of period 201,890 255,266 99,558

Cash and cash equivalents at end of period $845,889 $201,890 $255,266

Required

a. As this chapter explained, many companies that report net losses on their earnings statements report positive cash flows from operating activities. How do Tesla's net incomes compare to its cash flows from operating activities?

b. Based only on the information in the statements of cash flows, does Tesla appear to be growing the capacity of its business? Explain.

c. In 2013 Tesla paid off $452.3 million on Department of Energy (DOE) loans and $8.4 million of capital leases and other debt. Where did it get the funds to repay this debt?

d. All things considered, based on the information in its statements of cash flows, does Tesla's cash position appear to be improving or deteriorating?