Purchasing Stock in Tesla Case Study

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Thank you for your consultation on a suitable investment opportunity for your company. The automobile industry is one of the fastest-growing industries in the United States, especially the vehicle manufacturing sector (IBIS World, 2020). The automobile industry has experienced growth over the past five years and is expected to experience revenue growth of more than 20% in the next fiscal year. Therefore, your decision to invest in this industry would be profitable in both the short-term and long-term. While this industry is projected to experience tremendous revenue growth, some of the competitors in the sector could end up being unprofitable investment opportunities.

Technological revolution is one of the factors contributing to the rapid growth and profitability of this industry. Tesla Inc. and Ford Motor Company are among the major companies operating in this industry. As shown in its annual report, Tesla has focused on manufacturing electric vehicles and self-drive cars (Tesla Inc., 2019). Ford Motor Company is a traditional automobile that is slowly venturing into the manufacturing of electric and self-drive vehicles. The company manufactures these vehicles as part of its initiative to increase its product offerings and provide stiff competition to Tesla and others. Ford seeks to rely on its brand positioning to exploit opportunities in the electric and self-drive market in order to increase its profitability and market share (Ford Motor Company, 2019).

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The decision on whether to invest in Tesla or Ford Motor Company requires a comprehensive analysis of the financial performance of each of these companies. Some of the factors to consider in the analysis of the companies’ financial performance include liquidity…

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Given these factors, I recommend that you consider purchasing stock in Tesla as it has better solvency and profitability ratios compared to industry averages and major competitors like Ford Motor Company. While the firm has poor liquidity ratios compared to its competitors, the increase in these ratios for the year ending December 2019 indicates that Tesla has adequate short-term liquidity to pay for the coming liabilities (Stock Dividend Screener, 2020). Therefore, Tesla has adequate money to address the short-term solvency problem. Secondly, the increase in the company’s liquidity has positive impacts on its financial health and condition. As liquidity improves, Tesla’s financial condition will get better in the medium- and long-term. Additionally, the company’s high profitability ratios make it a suitable investment opportunity. Therefore, I believe that purchasing stock in this company is a viable….....

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