Another Liquidity Crunch at Tesla?

Abstract

Throughout 2017 and into 2018, Tesla was burning through cash as the company sought to ramp up production of its Model 3 all-electric vehicle (EV). Investors were questioning whether Tesla would need to raise additional capital. While the company had been successful in the past at issuing both equity and debt, it was not clear whether investors would be receptive to another round of fundraising. Students are asked to analyze data from Tesla’s statement of stockholders’ equity and debt footnote to gain insights into the company’s financing strategies and their reflection in Tesla’s balance sheet. An opportunity to prepare the accounting entries for specific equity and debt issuances is also provided. Finally, students are prompted to contemplate scenarios in which investors might cease providing capital to a company like Tesla.

Learning Objectives

To understand the accounting for equity and debt issuances while also introducing foundational concepts of bankruptcy.

Appropriate for the Following Course(s)

financial accounting

Another Liquidity Crunch at Tesla?

TEACHING NOTE AND SUPPLEMENTAL MATERIAL*

*TEACHING NOTES AND SUPPLEMENTAL MATERIALS ARE ONLY AVAILABLE TO EDUCATORS WHO HOLD TEACHING POSITIONS AT ACADEMIC INSTITUTIONS.