Compute and Interpret Liquidity and Solvency Ratios Selected balance sheet, income statement and cash flow statement information from Tesla, Inc. for 2017 and 2016 follows ($ thousands).

December 3120172016
Cash and cash equivalents$3,701,247$3,726,549
Restricted cash156,545106,741
Net receivables515,381499,142
Inventory2,263,5372,067,454
Other current assets268,365194,465
Current assets6,905,0756,594,351
Current liabilities7,674,6705,827,005
Total liabilities23,022,98016,750,167
Stockholders' equity5,965,7256,247,242
Year ended December 31,2017
Loss before income taxes$(2,209,032)
Interest expense504,592
Cash flows from operating activities(59,432)
Capital expenditures(3,748,147)
a. Compute the current ratio and quick ratio for each year.

Note: Round answers to two decimal places.

20172016
Current ratioAnswer
0.9

Answer
1.13

Quick ratioAnswerAnswer
b. Compute the debt-to-equity ratio for 2017 and 2016 and the times-interest-earned ratio for 2017.

Note: Round answers to two decimal places. Use a negative sign with your answer, if appropriate.

20172016
Debt-to-equity ratioAnswer
3.86

Answer
2.68

Times interest earned ratioAnswer
c. Compute the cash burn rate for 2017.

Note: Round answer to the nearest whole number. Use a negative sign with your answer, if appropriate.

$Answer

thousand per day

See answers below

Explanation:

1. Compute current ratio

Current ratio(2016) = Current assets / Current liabilities

= $6,594,351 / $5,827,005

= 1.13:1

Current ratio(2017) = Current assets / Current liabilities

= $6,905,075 / $7,674,670

= 0.89:1

Compute quick ratio

Quick ratio (2016) = Cash + Net receivables / Current liabilities

= $3,726,549 + $499,142 / $5,827,005

= $4225691 / $5827005

= 0.72:1

Quick ratio (2017) = Cash + Net receivables / Current liabilities

= $3,701,247 + $515,381 / $7,674,670

= $6,905,075 / $7,674,670

= 0.55:1

b. Compute debt to equity ratio

Debt to equity (2016) = Total liabilities / Stockholder's equity

= $16,750,167 / $6,247,242

= 2.68:1

Debt to equity (2017) = Total liabilities / Stockholder's equity

= $23,022,980 / $5,965,725

= 3.86:1

Compute times interest earned ratio

Times interest ratio(2017) = Earning before interest and income tax / Interest expense

• Please note that in 2017, loss before income taxes ($2,209,032) , hence no ratio is computed

c. Compute the cash burn rate for 2017.

Cash burn rate (2017) = Opening cash balance - Closing cash balance / Months

= $3,726,549 - $3,701,247 / 12

= $2,108

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i would say their habit of breaking down.