The Silicon Valley automaker is losing more than $4,000 on every Model S electric sedan it sells, using its reckoning of operating losses, and it burned $359 million in cash last quarter in a bull market for luxury vehicles. The company on Wednesday cut its production targets for this year and next. (As an aside: What did the stockholders think about CEO Elon Musk’s casual Saturday activity – walking on airplane wings – this weekend?)

Questions:
1.Explain CEO Elon Musk’s deadline and the prospects of meeting this, based on the article.
2. Why do automakers consume so much cash?
3. How does Tesla’s cash cushion compare with established automakers? Give percentage comparisons, where possible.
4. Discuss the capitalization of Tesla’s stock over time and currently.
5. Tesla’s financing has resulted in deferred gross profits from Model S leases amounting to $61.9 million. Why is this important to analysts? Include discussion about GAAP.

Source:
White, J. and P. Lienert. (2015) Insight: Tesla burns cash, loses more than $4,000 on every car sold. Reuters, Aug. 9 (Retrievable online at http://www.reuters.com)