It is a proxy for how much debt a company uses to

owner’s equity (assets/shareholder equity). It
is a proxy for how much debt a company
uses to operate

Higher not necessarily better (even if it raises
ROE). Why?

Higher ratio may indicate a riskier business that is
operating with larger amounts of debt

Business Strategy and Leadership Spring 2016
28
In-Class Exercise - Review

Let’s apply these ratios to Tesla and some
competitors

We’ll use publicly traded competitors (why?)

Tesla, GM, Ford, Fiat Chrysler

Steps:

Pull input data (Nasdaq.com, Annual reports, etc.)

Plug into ratios formulas

Graph

Analyze

Business Strategy and Leadership Spring 2016
29
Why Are We Doing This?

Errors made on Monday. Why?

Need to be precise and check your work

Put into a spreadsheet to avoid errors

Actually doing this helps you (hopefully)
understand and apply the concept

Business Strategy and Leadership Spring 2016
30
Charts
2014 2015
Tesla 59% 27%
GM
1% -2%
Ford -2% 4%
Fiat Chrysler
-3% 6%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
ChangeinSalesYoY%
%ChangeinSales
2013 2014 2015
Tesla -11% -32% -82%
GM 13% 12% 24%
Ford
46% 5% 26%
Fiat Chrysler
23% 5% 2%
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
ROE%
ReturnonEquity%
2013 2014 2015
Tesla -3% -5% -11%
GM 3% 2% 5%
Ford 6% 1% 3%
Fiat Chrysler 2% 1% 1%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
ROA%
ReturnonAssets%

Business Strategy and Leadership Spring 2016
31
Charts
2013 2014 2015
Tesla -4% -9% -22%
GM 3% 3% 6%
Ford
8% 1% 5%
Fiat Chrysler
2% 1% 0%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
ProfitMargin%
ProfitMargin%
2014 2015
Latest (Stock
Price)
Tesla 48% 8% 5%
GM -14% 0% -8%
Ford
0% -9% -6%
Fiat Chrysler 30% 20% -16%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
ChangeinStockPriceYoY%
ChangeinStockPrice%

Business Strategy and Leadership Spring 2016
32
Charts Discussion

What does this mean?

What are the implications for the industry and
for Tesla?

What advice do we give Tesla based on this
financial ratios analysis?

What additional analysis should we do?
Why?

Business Strategy and Leadership Spring 2016
33
Capsim Assignment

Capsim

Practice Round 3 due 4/24 at 11:00 pm

On Monday, April 25: Individual team debrief

Each team will have 2-3 minutes to present their
top lessons learned from Capsim so far

Could be process-related

And/or could be findings-related

No slides

All team members should speak

Very informal presentations

Business Strategy and Leadership Spring 2016
34
Assignment for Today

Complete Financial Ratios analysis

For Facebook and Google: 2013 – 2015

Also include latest stock price for Google and Facebook

Use Nasdaq.com or annual reports for data

Use Ratios Worksheet (Form on GS)

Provide ratios over time for both companies

Compare ratios over time (Can be graphed) for the two
companies and provide your commentary on trends and
key differences

Maximum of 1 page for ratios + your commentary

We will discuss briefly next class

Business Strategy and Leadership Spring 2016
35
Extra Credit Assignment

We will review this on Monday if time

Extra credit assignment (additional 2.5%
points):

Correctly match the 5 types of companies with
their corresponding financial statements and
ratios from “Assessing a Company’s Future
Financial Health” (Pages 11-13, Section: The
Case of the Unidentified Industries)

Business Strategy and Leadership Spring 2016
36
Zin Obelisk Game

Introduction

The game

Discussion