Required:

Write a memo, with appropriate appendices, using the

instructions below. The memo should be one page in length, though memos up to one and one-half pages are permissible and over page and one-half will receive grade deductions; be concise and to the point.

Address the following issues about Tesla:

1. In this latest reporting year, Tesla has finally made a profit! In the preceding years, Tesla did not

make a profit and yet it was considered a darling or a favored stock on Wall Street. Using the

tools of financial analysis, you are to prepare a memo that will discuss the financial trends that

underlie Teslas financial status.

2. Point out other items that impact Teslas financial health (changes in consumer preferences, societal

trends, supply chain impacts, and so on) and include this information in your analysis as well.

(What does the 10-K say about this? The 10-K says a lot so do not ignore this source of

information.)

Your attached appendices (multiple pages encouraged) will provide a reference source for calculations/results used in the memo.

*At a minimum, show the disaggregation of 2020 ROE components of profitability, asset turnover, and financial leverage. Do the same for 2019 for ROE. Showing other past years of disaggregation is not required but may be insightful if included. Use ROE definition from our textbook. * Compute Gross Profit Margin for past 5 years and show in table format to show the trend. Probably best to show a gross profit by identified revenue sources and in total. * Compute the cash conversion cycle for the past 2 years. * Include any other calculations/information in the appendices that support your memo and its conclusions.

Tesla, Inc. Consolidated Balance Sheets (in millions, except per share data) December 31, 2020 December 31, 2019 $ 19.384 1.886 4,101 1,346 26,717 3,091 5.979 12,747 1.558 313 207 1,536 52,148 6,268 1.324 3,552 959 12,103 2,447 6,138 10,396 1,218 339 198 1.470 34,309 $ $ Assets Current assets Cash and cash equivalents 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 Other non-current assets Total assets Liabilities Current liabilities Accounts payable Accrued liabilities and other Deferred revenue Customer deposits Current portion of debt and finance leases Total current liabilities Debt and finance leases, net of current portion Deferred revenue, net of current portion Other long-term liabilities Total liabilities Commitments and contingencies (Note 16) Redeemable noncontrolling interests in subsidiaries Convertible senior notes (Note 12) Equity Stockholders' equity Preferred stock; $0.001 par value; 100 shares authorized; no shares issued and outstanding Common stock; $0.001 par value: 2,000 shares authorized: 960 and 905 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively (1) Additional paid-in capital (1) Accumulated other comprehensive income (loss) Accumulated deficit Total stockholders' equity Noncontrolling interests in subsidiaries Total liabilities and equity 6,051 3,855 1,458 752 2.132 14,248 9.556 1.284 3.330 28.418 3,771 3,222 1,163 726 1,785 10,667 11,634 1,207 2,691 26.199 643 604 51 - 1 27,260 363 (5.399) 22.225 850 52.148 1 12,736 (36) (6,083 6,618 849 34,309 (1) Prior period results have been adjusted to reflect the five-for-one stock split effected in the form of a stock dividend in August 2020. See Note 1, Overview, for details. Tesla, Inc. Consolidated Statements of Operations (in millions, except per share data) 2020 Year Ended December 31, 2019 2018 $ $ 26,184 $ 1,052 27,236 1,994 2.306 31,536 19,952 869 20.821 1,531 2.226 24,578 17,632 883 18,515 1,555 1,391 21,461 19,696 13.686 563 488 20,259 1,976 2,671 24,906 6,630 15,939 459 16,398 1,341 2,770 20,509 4,069 14,174 1,365 1,880 17,419 4,042 Revenues Automotive sales Automotive leasing Total automotive revenues Energy generation and storage Services and other Total revenues Cost of revenues Automotive sales Automotive leasing Total automotive cost of revenues Energy generation and storage Services and other Total cost of revenues Gross profit Operating expenses Research and development Selling, general and administrative Restructuring and other Total operating expenses Income (loss) from operations Interest income Interest expense Other (expense) income, bet Income (loss) before income taxes Provision for income taxes Net income (loss) Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries Net income (loss) attributable to common stockholders 1,491 3,145 4,636 1,994 30 (748) (122) 1,154 292 862 1,343 2.646 149 4,138 (69) 44 (685) 45 (665) 110 (775) 1,460 2,835 135 4,430 (388) 24 (663) 22 (1,005) 58 (1,063) 141 721 87 (862) $ (87) (976) $ 690 (870) $ (976) $ 0.74 (0.98) $ $ 0.64 $ Less: Buy-out of noncontrolling interest 31 Net income (loss) used in computing net income (loss) per share of common stock Net income (loss) per share of common stock attributable to common stockholders (1) Basic $ (1.14) Diluted (0.98) $ (1.14) Weighted average shares used in computing net income (loss) per share of common stock (1) Basic 853 Diluted 1,083 887 853 (1) Prior period results have been adjusted to reflect the five-for-one stock split effected in the form of a stock dividend in August 2020. See Note 1, Overview, for details. The accompanying notes are an integral part of these consolidated financial statements. 1. I 933 887 Tesla, Inc. Consolidated Balance Sheets (in millions, except per share data) December 31, 2020 December 31, 2019 $ 19.384 1.886 4,101 1,346 26,717 3,091 5.979 12,747 1.558 313 207 1,536 52,148 6,268 1.324 3,552 959 12,103 2,447 6,138 10,396 1,218 339 198 1.470 34,309 $ $ Assets Current assets Cash and cash equivalents 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 Other non-current assets Total assets Liabilities Current liabilities Accounts payable Accrued liabilities and other Deferred revenue Customer deposits Current portion of debt and finance leases Total current liabilities Debt and finance leases, net of current portion Deferred revenue, net of current portion Other long-term liabilities Total liabilities Commitments and contingencies (Note 16) Redeemable noncontrolling interests in subsidiaries Convertible senior notes (Note 12) Equity Stockholders' equity Preferred stock; $0.001 par value; 100 shares authorized; no shares issued and outstanding Common stock; $0.001 par value: 2,000 shares authorized: 960 and 905 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively (1) Additional paid-in capital (1) Accumulated other comprehensive income (loss) Accumulated deficit Total stockholders' equity Noncontrolling interests in subsidiaries Total liabilities and equity 6,051 3,855 1,458 752 2.132 14,248 9.556 1.284 3.330 28.418 3,771 3,222 1,163 726 1,785 10,667 11,634 1,207 2,691 26.199 643 604 51 - 1 27,260 363 (5.399) 22.225 850 52.148 1 12,736 (36) (6,083 6,618 849 34,309 (1) Prior period results have been adjusted to reflect the five-for-one stock split effected in the form of a stock dividend in August 2020. See Note 1, Overview, for details. Tesla, Inc. Consolidated Statements of Operations (in millions, except per share data) 2020 Year Ended December 31, 2019 2018 $ $ 26,184 $ 1,052 27,236 1,994 2.306 31,536 19,952 869 20.821 1,531 2.226 24,578 17,632 883 18,515 1,555 1,391 21,461 19,696 13.686 563 488 20,259 1,976 2,671 24,906 6,630 15,939 459 16,398 1,341 2,770 20,509 4,069 14,174 1,365 1,880 17,419 4,042 Revenues Automotive sales Automotive leasing Total automotive revenues Energy generation and storage Services and other Total revenues Cost of revenues Automotive sales Automotive leasing Total automotive cost of revenues Energy generation and storage Services and other Total cost of revenues Gross profit Operating expenses Research and development Selling, general and administrative Restructuring and other Total operating expenses Income (loss) from operations Interest income Interest expense Other (expense) income, bet Income (loss) before income taxes Provision for income taxes Net income (loss) Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries Net income (loss) attributable to common stockholders 1,491 3,145 4,636 1,994 30 (748) (122) 1,154 292 862 1,343 2.646 149 4,138 (69) 44 (685) 45 (665) 110 (775) 1,460 2,835 135 4,430 (388) 24 (663) 22 (1,005) 58 (1,063) 141 721 87 (862) $ (87) (976) $ 690 (870) $ (976) $ 0.74 (0.98) $ $ 0.64 $ Less: Buy-out of noncontrolling interest 31 Net income (loss) used in computing net income (loss) per share of common stock Net income (loss) per share of common stock attributable to common stockholders (1) Basic $ (1.14) Diluted (0.98) $ (1.14) Weighted average shares used in computing net income (loss) per share of common stock (1) Basic 853 Diluted 1,083 887 853 (1) Prior period results have been adjusted to reflect the five-for-one stock split effected in the form of a stock dividend in August 2020. See Note 1, Overview, for details. The accompanying notes are an integral part of these consolidated financial statements. 1. I 933 887