The company that I will be examining is Tesla Motors, using its 2017 financial statements.
Net Income
The net income for Tesla in 2017 was a loss of $2.2 billion. In the year prior, the company recorded a net loss of $773 million. The net income figure is important for investors because the net income is basically what the company has earned in the prior year. The value of the company is determined by its net assets, and if the company has lost money, then it has lowered the value of the shareholders' equity, which means that any increase in assets has come with an increase in debt. For investors, the net income is one of the most basic measures of the company's financials – is it profitable or not?
For Tesla, the key concern is that the net income is that the company recorded a significantly larger loss for 2017 than for 2016. It has higher gross profit, but its operating expenses were significantly higher, as were its interest expenses. Thus, despite the fact that revenues are increasing and the company continues to increase its gross profits, it owes more money on debt to fuel its growth, and the increases in things like selling, general and administrative expenses likely also relate to higher spending in order to position the company for growth in the future. Investors thus are likely to take the worse loss with a grain of salt, because it represents an investment in future growth. Whether...
References
Investopedia (2018) Financial statement analysis. Investopedia. Retrieved March 11, 2018 from https://www.investopedia.com/terms/f/financial-statement-analysis.asp
Tesla Motors 2017 Form 10-K. Retrieved March 11, 2018 from http://ir.tesla.com/secfiling.cfm?filingID=1564590-18-2956
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