Global Expansion Financing
All of this will play into a possible expansion into Brazil and if it is feasible for them at this time. Capital Structure “The term capital structure refers to the percentage of capital (money) at work in a business by type. Broadly speaking, there are two forms of capital: equity capital and debt capital” (The Balance, 2018). For Tesla, this is a particularly important item to watch due to the production issues they have been having in recent years. Looking at a company’s balance sheet gives insight into where they stand in their capital structure. tesla. com, 2018). “Capital expenditures during 2017 were from $3. 41 billion of purchases of property and equipment (mainly for Model 3 production) and $666. 5 million for the design, acquisition and installation of solar energy systems under operating leases with customers.
“Furthermore, we received $511. 3 million of net proceeds from collateralized lease borrowings and $527. 5 million of net proceeds from fund investors” (Ir. tesla. com, 2018). This may be partly because they are a relatively new company, or it may be because of mismanagement. Either way, this is usually a red flag over time for investors because it appears the company is not profitable enough to carry long-term debt. Through 2017, the company has taken on $10 billion in debt due to manufacturing problems with the Model 3, and to recapitalize Solar City (Grant, 2018). “That makes Tesla’s fight to generate profits much more urgent than some shareholders might realize. Mr. We currently do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant (Ir.
tesla. com, 2018). Having this policy should not be an issue for investors as many startups have done the same in their initial years. tesla. com, 2018). This statement is from Tesla’s 2017 10-K. The company is aware of their funding needs in order to continue expanding globally. If the company is going to expand to Brazil, it would be the best bet for them to connect with a local bank which can advise them in how to fund their entry into the market. gov, 2018). Basically, treating them as any domestic investor would be treated. These tax exemptions will cut back Tesla’s expenses and liabilities which will have a positive effect on their cash flow. Financing According to Tesla’s 2017 10-K, they held balances in foreign currency of $521.
5million in US Dollar equivalent (Ir. “In cases where the functional currency is not the U. S. dollar, we recognize a cumulative translation adjustment created by the different rates we apply to accumulated deficits, including current period Income or loss, and the balance sheet” (Ir. tesla. com, 2018). and Bragg, S. Capital structure. [online] AccountingTools. Available at: https://www. accountingtools. Brazil - 1-Openness to and Restriction on Foreign Investment | export. gov. [online] Available at: https://www. export. gov/article?id=Brazil-openness-to-foreign-investment [Accessed Aug 28. Grant, M. Sizing Up Tesla’s $10 Billion Debt Stack. [online] WSJ. Available at: https://www. wsj. Moody's is still expecting Tesla to raise about $2 billion in capital this year. [online] MarketWatch. Available at: https://www. marketwatch. com/story/moodys-is-still-expecting-tesla-to-raise-about-2-billion-in-capital-this-year-2018-05-03 [Accessed Aug 28.
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