Compartmental Financials
Large corporations or entities require accounting practices that are unmeasurable in comparison to small businesses. Many entities have several compartments within a single entity, which causes a bit of an upset regarding the stock's valuation or the commodity itself. Many who attempt to evaluate the businesses aren't able to wrap their minds around the companies financials, which is understandable.
I've thought about this using Tesla as an example. Tesla has many components or facets within its' entity. I've titled this Compartmental Financials due to the compartments of Solar City and Tesla Motors under the same umbrella, but I do not forget the energy products created by Tesla. The Battery Walls and PV Panels used in Solar City and the Battery Packs for the vehicles are products used solely by the works of the compartments of Tesla.
Stockholders and investors question Tesla's valuation, and I have thought about this, sometimes unwillingly, since this is a new topic for me. One year and four months ago, I didn't know who Elon Musk was or his company, Tesla. While on a route in Dallas, TX, I drove by a Tesla location daily (twice a day) and often wondered what the facility was because it appeared very odd, but I never knew it was a Tesla location for the vehicles. To me, it's funny, maybe not to you, but eh okay.
This article is an idea I have thought of regarding Compartmental Financials for Large Companies. Each entity's compartment requires its bank accounts, departments, production, and even human resource separate, so nothing overlaps except the brand or company name. By ensuring the separation, the company can perform proper accounting procedures without disrupting or having questionable valuations. The valuations themselves can be determined by ratio once the annual or quarterly financials are complete. Let's say Tesla has a rate of 75% Vehicles and 25% Solar City, but not including the energy products as part of the valuation unless those items sell as products for use by another company.
The Compartmental Financials would have a summarized top page for the entity to show all of the company's funds, assets, and liabilities. Each page following would be the entity's compartments, with the breakdown and the ratio during that period or annually to determine the compartments financials. When implementing compartmental accounting, doubts will subside regarding who or what within the entity, and fair lending or valuation is achievable.
Compartmental Financials utilization is for any entity, small or large. This accounting process benefits the CEOs or CFOs and their banks or lenders, avoiding any confusion and satisfy investors by ensuring their investment is substantial. As a new investor, having the ability to determine each compartment valuation within an entity helps define the company I am investing in—cheers to investments and sound financial practices. I'm unaware if this is a current practice, but I expect someone will say so if it is.
Any questions? Impossible? Already being performed? Out of sorts? Let me know your thoughts, I'd enjoy healthy feedback. Until then, invest in stable investments. See Ya At The Top because I'm going to the Moon!
As always, I wish all the best for the best, and that means you!
His Love & His Peace Always!
DeAnna XoXo
