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Compute and Interpret Liquidity and Solvency Ratios

Selected balance sheet, income statement, and the statement of cash flows information from Tesla, Inc. $($the Company$),$ for $2020$ and $2019$ follows $($$ millions$).$

December $31,202220202019$

Cash and cash equivalents $$19,384$ $$6,268$

Net receivables $1,8861,324$

Inventory $4,1013,552$

Other current assets $1,346959$

Current assets $26,71712,103$

Current liabilities $14,24810,667$

Total liabilities $28,41826,199$

Stockholders$$ equity $23,7308,110$

Year Ended December $312020$

Income before income taxes $$1,154$

Interest expense $748$

Cash flows from operating activities $5,943$

Capital expenditures $3,157$

a$.$ Compute the current ratio and quick ratio for each year and determine any trend in liquidity.

$$ Note: Round your answers to the nearest million dollars.

Numerator $($$ millions$)-$: Denominator $($$ millions$)=$ Result

$2020$ Current Ratio $-$: $=$

$2019$ Current Ratio $-$: $=$

$2020$ Quick Ratio $-$: $=$

$2019$ Quick Ratio $-$: $=$

The Company's current ratio Answer $9$ and quick ratio Answer $10$ from $2019$ to $2020.$

b$.$ Compute the debt$-$to$-$equity ratio for $2020$ and $2019$ and the times$-$interest$-$earned ratio for $2020.$ Determine the trend in the debt$-$to$-$equity ratio.

$$ Note: Round your answers to the nearest million dollars.

Numerator $($$ millions$)-$: Denominator $($$ millions$)=$ Result

$2020$ Debt$-$to$-$equity ratio $-$: $=$

$2019$ Debt$-$to$-$equity ratio $-$: $=$

$2020$ Times$-$interest$-$earned ratio $-$: $=$

The Company's debt$-$to$-$equity ratio Answer $17$ from $2019$ to $2020.$

c$.$ In $2018,$ Tesla, Inc. had a cash burn rate of approximately $$8,000$ per day. Do we need to compute the cash burn rate for $2020?$

We Answer $18$ to compute the cash burn rate because Answer $19$ exceeds Answer $20$ in $2020.$

Almost every new company starts with Answer $21$ free cash flow. But every successful new company must reach a point where it stops Answer $22$ cash and begin Answer $23$cash. The $2020$ report for this company appear to show that point may have been reached.

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