Tesla Article Case Study

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- Profit: Profit is a financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. Profit that is gained goes to the business's owners, who may or may not decide to spend it on the business.

Tesla’s quarter gross profit increased to $139m from only $$39m a year ago with a net profit of $22m. This profit driven by the improve sales of Sedan and Model X Sport-utility vehicle, a reduction in spending and a boost from selling pollution tax credits to other auto makers.

- Why Tesla’s cash fall by $162m while its Free Cash Flow was Positive?

The net income is a number that has been computed by accountants and reported on the company's income statement. A company's annual net income is its revenue, minus all applicable expenses in a given year. If a firm's expenses are greater than its revenue, it will incur a loss for that year, which must be reported on its income statement.

A typical income statement will include expenses such as depreciation, the use of prepaid expenses, or losses recorded on paper for bad debt expenses. All of these expenses, while they do detract from a company's earnings (as reported by accountants) for the year, are not the kinds of expenses the company actually pays cash for.

As per this case, Tesla has repaid $600m debts and secondly the $600 debt payment is not part of the Operating Activity for the CFC but is it part of the Investing Activity. This is the main reason that Tesla cash fall by $162m.