Financial Risk Case Study

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Financial Risk Case Study

Part A

Financial Risk代写 ESG should be included as one of the financial risks as it involves the welfare of the shareholders and executive pays.

 

Question 1

Tesla faces various financial risk which has affected its general performance regardless of it being the seconding largest automobile company in the world. One of the risk being lack of enough cash flow as stated by Moody when they down rated Tesla in credit performance (Cheng, 2018). According to Cheng the reasons why Moody lowered Tesla credit rating is because of its continued low performance regardless of Musk promising increase in production and sales.

Since 2017, Tesla shares have gone down by 8.2 percent. Its junk bonds have also lowered in value to 90.8 cents. That notwithstanding, Tesla’s cash flow $3.4 billion is not sustainable as it cannot meet the company’s immediate cash needs of more than $3.6 billion (Tesla, 2018).

Question 2  Financial Risk代写

Negative cash flow is when the cash inflow is lower than the cash outflow thus creating a deficit. In 2017 Tesla experienced negative cash flow which is intended to bridge using stock-based compensation and equity financing (Tesla, 2018). Tesla has long run long of producing more than 5000 Model 3 cars for the market while lowering its cash burn out to increase its cash flow.

Question 3  Financial Risk代写

An operational problem caused the accident. The driver had been prompted to take the wheel 6 seconds before the crash.

Financial Risk代写
Financial Risk代写

Question 4

Elon Musk is requested to achieve a milestone of making the company worth more than $100 billion which bridges the company’s market cap and an improvement in EBITDA (Alder, 2018). The milestones do not align with Musk interest in making the company private.

Question 5  Financial Risk代写

Tesla has the potential to grow to the level of being the most valued company in the world. The company has opportunities to source equity financing to fund its unsustainable cash flow. Besides, it can reduce its cash burnouts by reducing operational costs. Also, it can achieve its 5000 production units a week of the Model 3 car which will make it live up to the promises and hence reward itself with an increase in share prices and junk bonds. These make Tesla a moderately financial risky company.

Part B

Question 1a  Financial Risk代写

ConEdison is a well-performing company with a good rapport in the energy market.  However, there are looming financial risks including disruption in the energy market which might affect energy suppliers and high unfunded pension and other retirement benefits that are accruing.

Question 2b

The company has never experienced negative cash flow, and for three consecutive years, it has maintained a net cash flow of $13, $9 and $9 in 2016, 2017 and 2018 respectively which are enough for meeting the company’s immediate obligations (ConEdison, 2018).

Question 3i  Financial Risk代写

ESG criteria are a set of standards that measure a company’s operations that are socially conscious. In which case, environmental criteria measure how the company is mindful of the environment (Jagannathan, Ravikumar, & Sammon, 2017). Social criteria measure how the company relates to workers, suppliers, customers, and the community. Governance criteria measure the company leadership, controls, and shareholders’ rights.

In this context, Tesla is performing better in terms of environmental criteria compare to both Samsung and Facebook. However, on the overall outlook of the ESG criteria, Tesla performs lowly compared to both Facebook and Samsung.

Question 4ii  Financial Risk代写

ESG should be included as one of the financial risks as it involves the welfare of the shareholders and executive pays. If the company is unable to pay dividends to its shareholders, it is not performing.

References  Financial Risk代写

Financial Risk代写
Financial Risk代写

Cheng, E. (2018). Tesla shares fall after Moody’s downgrades credit rating. Retrieved from https://www.cnbc.com/2018/03/27/moodys-downgrades-tesla-credit-rating-on-model-3-production-delays.html

Alder, M. (2018). Musk Has a Long Road Ahead to Earn His $2.6 Billion Tesla Grant. Retrieved from https://news.bloomberglaw.com/employee-benefits/musk-has-a-long-road-ahead-to-earn-his-26-billion-tesla-grant

ConEdison. (2018). Con Edison annual report 2018 (pp. 1-200). New York. Retrieved from http://nasdaqomx.mobular.net/nasdaqomx/7/3566/5077/document_0/2018%20Annual%20Report%20for%20ConEdison-porcessed.pdf

Jagannathan, R., Ravikumar, A., & Sammon, M. (2017). Environmental, Social, and Governance Criteria: Why Investors are Paying Attention (No. w24063). National Bureau of Economic Research.

Tesla, (2018). Tesla Inc. annual report 2018 (pp. 1-276). California. Retrieved from http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_TSLA_2017.pdf

 

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