But it makes sense to provide as much information as possible to year-olds signing on the dotted line for student loans… loans they may not even be certain they can pay back. Access to data showing how other alumni following a similar path have fared in the job market is critical to ensuring students are making financial decisions that make sense.
Before I had a chance to analyze the Q, others had already posted their findings on Twitter or in Seeking Alpha articles. Automakers in 10 States are required to sell a specified number of electric or hybrid vehicles within the State.
Credits are earned for the number of emission-friendly vehicles sold. GHG credits function in a similar way at the Federal level. Companies with excess credits are allowed to sell their excess credits to car manufactures and other companies that manufacture carbon-emission equipment and do not generate enough credits to be in compliance with the regulation.
Selling excess credits over the past few years has been a significant source of cash flow generation for Investment research report. The money raised by selling these credits is accounted for as income under GAAP.
Rather, they postured as if the net income was generated thru cost-efficiencies and sales volume. In all Investment research report, Musk chooses the timing and quantity of the credit sales based on when he needs to generate cash. Selling regulatory-derived environmental credits is a low-quality, unreliable source of income.
This will drive down the resale value of these credits toward zero. Over time, this source of income and cash will disappear. Warranty Provision — Every quarter companies that issue warranties have to take a warranty expense provision, which is an estimate of the quarterly expense that will be incurred under warranties on products sold by the company.
The warranty provision hits the income statement as an expense. The idea is to match estimated quarterly warranty costs that will be incurred from selling products covered by the warranty each quarter.
Warranty expense is part of the cost of goods sold. The information on warranty expenses is found in the footnotes this is standard. In Q3Tesla sold a little more than double the number of vehicles sold in Q3 At the very least, and to be prudent, in Q3 this year Tesla should have at used at least double the warranty provision it used in Q3 This is especially true since the Model 3 is in its debut model year and will likely require higher than expected warranty-based repairs.
The probability of greater than expected warranty repairs for cars sold during Q3 is even higher when taking into account the high number of production difficulties the Company encountered — and about which Musk whined publicly.
To be sure, the warranty expense provision can be adjusted based on using the actual amount of warranty costs incurred over time.
But given the limited history of Tesla, and given that the Model 3 is a 1st-year production automobile with noted production and quality control issues, Tesla probably should have used a warranty provision that was higher on a per car delivered basis than the number used in Q3 Inventory Write-Down — An inventory write-down is recorded as an expense in the quarter in which it is taken.
For a company like TSLA, an inventory write-down occurs for excess or obsolete inventories unsalable cars, worthless parts and supplies or when the carrying value of certain cars held in inventory is greater than the realizable value.
The latter would primarily apply to cars taken back by Tesla under lease guarantees keep this tidbit in mind for reference below or cars held in inventory deemed unsalable because the cost of fixing manufacturing defects is greater than the gross margin generated from selling the car.
In Q3the write-down was 1. This chart shows the degree to which it appears as if Tesla purposely minimized the inventory write-down expense in Q3 If TSLA had used the historical average of 1.
This also contributed to the large increase in the gross profit margin in Q3 vs historical quarters. The inventory write-down charge was clearly an extreme outlier in relation to the historical application of this write-down over the previous six quarters.
Make no mistake, the minimization of the inventory write-down expense in Q3 was a blatant effort to exploit accounting standards for the purpose of reducing GAAP expenses and thereby increasing GAAP income. The discrepancy between the Q3 charge vs historicals predictably was not addressed by the CFO or by analysts in the Q3 earnings conference call.
In Q2these charges were The stunning plunge as a percentage of revenues for these items in Q3 vs Q2 is the equivalent of asking us to believe in the existence of Santa Clause.The Advanced Guide to Equity Research Report Writing takes your writing to the next level. Who Is This Guide for?
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