A critical financial-accounting skill is the ability to read, analyze, and make actionable determinations from any financial statement. Business leaders gain valuable information from the analysis of their direct competitors as well as organizations that operate in similar fields.
You are the CFO of a small company that provides consulting services in the automotive industry. Your clients include suppliers, dealer networks and a number of other companies investing and operating in the sector. Many of your clients believe the industry is on the verge of a significant disruption led by newcomers like Tesla with its approach to both electric-powered vehicles and with steps it has taken to change the traditional dealer model. Your CEO will meet with several key clients over the next few weeks and has requested an analysis reviewing Tesla’s most recent annual report and comparing that to the most recent report from one of the traditional automakers – General Motors.
Telsa Annual Report 2016
General Motors Annual Report 2016
Create an executive summary you would feel comfortable turning in to your CEO that is no more than 2 pages, single-spaced using 12-point Times New Roman font. You may also include an appendix with additional references, graphs, charts, and tables for additional support if needed.
1. Competitor Strategies
Identify and explain one key strategy from each company that the company explicitly discussed in the annual report.
2. Net Income Margins
What are the after-tax net income margins (aka, net profit margin) for both companies?
How do they compare?
Who achieves the higher net income margin? Why?
Tip: Analyze the major cost structure line item in the income statement (COGS, SG&A, interest, other, and taxes) as a percentage of net sales to identify reasons for better net income margins. Identify and comment on the differences you see. You may not know why a particular cost item like COGS is higher or lower, but your CEO only seems interested in knowing which cost structure items are higher or lower for each company.
3. Inventory Management
Who has more inventory in terms of days of inventory last year? (Inventory Days on Hand ratio)
What are their respective 3-year trends for days of inventory?
What accounting approach does each of the companies use to value their inventory? (The accounting approach can be found in the Notes section.)
4. Cash is King
How much net cash from operations did each company generate last year?
Which company has done a better job generating cash from operations?
In laymen’s terms, how is each company spending their cash with respect to reinvestments in the business, changes in debt, and returning money to shareholders?
How do the companies compare in terms of the current ratio, and what are their respective 3-year trends?
Does their current ratio indicate that either of these companies could go bankrupt soon? Explain
Grade A Work. Must be Plagiarism Free and include references