Essay Sample on How Duke Energy and Tesla Make Money

Duke Energy Corporation refers to an American electric power stock firm with properties in Canada and headquarters in Charlotte, North Carolina. Approximately the entire Duke Energy’s Midwest power generation originates from natural gas, coal, or oil. In contrast, 50% of Carolina's energy generation arises from its nuclear energy plant which distributes over 58,299 megawatts to about 7.7 million consumers (Relf et al., 2020). The company’s products include the generation, transmission, and distribution of electricity and the sale of natural gas. The firm concentrates on the operation, development, and ownership of different energy generation facilities all over the United States.

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Duke Energy’s success depends on its business strategy of creating value for its customers and shareholders. Tesla Inc. refers to an American clean energy and electric vehicle firm headquartered in Palo Alto, California. Besides, the company’s products include electric vehicles, Tesla batteries, solar panels, and solar roof tile production (Liu, 2020). The company runs many manufacturing and assembly plants. Tesla’s success involves its business model that follows classic technological-brand life progressions primarily targets wealthy consumers, and then ventures into more significant markets at lower rate points.

Each Company’s Most Significant Assets

Duke Energy’s most important assets include its power plant, property, goodwill, solar and wind farms, and equipment (Relf et al., 2020). Tesla’s most valuable assets include its effective leadership, strong customer loyalty, successful implementation of its business model, and ambition (Liu, 2020). Tesla’s long-term useful properties include a solar energy system, operating lease vehicles, plant and equipment, and premises.

Assets Omitted from the Books of the Companies due to the Operation of GAAP

Duke Energy omitted from its books unsold equipment, retired plant, and expansion in commercial renewables from new solar farms (Relf et al., 2020). Tesla Resale Value Guarantee (RVG) aimed to provide vehicle credit finance organization dependable three-year outstanding value numbers they could introduce into car loan funding (Liu, 2020). Tesla, therefore, omitted assets such as vehicles leased through its banking associates, and the solar energy systems hired and those to get leased due to the generally accepted accounting principles.

Critical Estimates for each Company

Duke Energy generates a revenue of about US$ 22.74 billion, has an operating income of approximately US$ 5.34 billion, and net earnings of over US$ 2.17. The company’ total assets stand at around US$ 132.76 billion, with total equity of US$ 41.04 billion by 2016 (Relf et al., 2020). Tesla had a production output of 367,500 vehicles, 1,651 MWh batteries, and 173 MW solar by 2019. Revenue for the company remains at about US$ 24.578 billion, operating income stood at approximately US$ -69 million, while its net income indicated US$ -862 million by 2019 (Liu, 2020). Moreover, the company’s total assets and total equity revolved around US$ 34.309 billion and US$ 6.618 billion, respectively, by 2019.

Financial Statements that Better Reflect the Economic Performance and Position of Each Company

Duke Energy’s incomes of US$ 3.7 billion (as at 31st December 2019) increased by 40% compared to the earnings of 2018 (Relf et al., 2020). The increase indicates that the company continues to expand. Earnings per share, gross margin, operating margin, net margin of the company increased, showing that the company’s economic performance and position relate to its financial statements. For the half-year ended 30th June 2020, Tesla Inc. incomes grew by 10% TO US$ 12.02 billion. Net income totaled US$ 120 million against a loss of US$ 1.11 billion. The financial statements better reflect the economic performance and position of the company.

Price to Book Ratio of Each Company

The current cost to book ratio for Duke Energy as of 28th August 2020 stands at 1.31 (Relf et al., 2020). Duke Energy’s stock price equals 79.71, while its book value per share equals 60.85. The present cost to book ratio for Tesla as of 28th August 2020 stands at 38.46. Tesla’s stock price equals 2213.40, while its book value per share equals 57.55 (Liu, 2020). The vast differences between stock prices of the two companies indicate the massive difference in price to book ratio.

Items in 2019, 4th Quarter Earnings that Impact the Quality of Tesla’s Earnings

There exist things that affected the earnings of Tesla in quarter four in the fiscal year that ended in 2019. These items included strong demand for Model 3, high speed in the launch of Model 3 production, and the beginning of Model Y manufacturing (Liu, 2020). Besides, the company sustained cost controls across the business, like zero spending on promotion. Furthermore, the company attracted new consumers.

Non-GAAP Measures Employed by Tesla

Tesla deploys non-GAAP measures like non-GAAP net income (loss) attributable to corporate stockholders, non-GAAP net income attributable to common stockholders on the foundation of per-share basis, Adjusted EBITDA, Adjusted EBITDA margin, free cash flow, and non-GAAP automotive gross margin (Liu, 2020).

References

Liu, Y. (2020). Evaluation of financial risk in Tesla Company. www.dspace.vsb.cz/bitstream/handle/10084/139921/LIU0029_EKF_B6202_6202R010_2020.pdf?sequence=1

Relf, G., Cooper, E., Gold, R., Goyal, A., & Waters, C. (2020). 2020 Utility energy efficiency scorecard. www.nationalefficiencyscreening.org/wp-content/uploads/2020/02/ACEEE-2020-EE-Scorecard.pdf