The Impact of Tesla’s Capital Structure on Its Financial Performance
Rui Sun
Co-Presenters: Individual Presentation
College: College of Business and Public Management
Major: Accounting
Faculty Research Mentor: Huaibing Yu
Abstract:
Tesla Inc. (TSLA) has emerged as a dominant player in the electric vehicle industry, yet its financing decisions remain a subject of debate among investors and analysts. This study examines the relationship between Tesla’s capital structure and its financial performance, focusing on key metrics such as return on equity (ROE), net income, and stock price volatility. Given Tesla’s aggressive expansion strategy, it has frequently relied on both debt and equity financing, making it an ideal case for analyzing how leverage affects corporate profitability and shareholder value. Using a combination of historical financial data from Tesla’s SEC filings, stock market data from Yahoo Finance, and debt issuance reports from Bloomberg, this research applies correlation and regression analysis to assess the impact of Tesla’s debt-to-equity ratio on its financial performance. Key variables analyzed include Tesla’s debt ratio, net income, return on assets (ROA), and stock performance over the past five years. The findings reveal that while Tesla’s strategic use of debt financing has enabled rapid expansion and innovation, excessive leverage poses potential risks, particularly during economic downturns or financial distress. The study highlights the importance of a balanced capital structure in maximizing shareholder value while mitigating financial risk. The results suggest that Tesla's capital structure significantly influences its profitability, with moderate levels of debt contributing positively to financial performance, but higher leverage potentially increasing financial volatility. This research provides valuable insights for investors, policymakers, and financial analysts in assessing Tesla’s long-term financial sustainability. It also underscores the broader implications of capital structure decisions in the high-growth technology and automotive sectors, where financial flexibility is crucial for sustaining competitive advantage. Keywords: Tesla, Capital Structure, Debt Financing, Financial Performance, ROE, Leverage, Stock Performance