Cadence Design Systems Inc (CDNS)

Inventory turnover

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cost of revenue	US$ in thousands	1,017,830	916,313	818,048	744,293	685,479
Inventory	US$ in thousands	181,661	128,005	115,721	75,956	55,802
Inventory turnover		5.60	7.16	7.07	9.80	12.28

December 31, 2023 calculation

Inventory turnover = Cost of revenue ÷ Inventory
= $1,017,830K ÷ $181,661K
= 5.60

Cadence Design Systems, Inc. has experienced fluctuations in its inventory turnover ratio over the past five years. The inventory turnover ratio measures how efficiently a company is managing its inventory by indicating the number of times the inventory is sold and replaced within a specific period.

In 2019, Cadence had a relatively high inventory turnover ratio of 4.77, which suggests that the company was efficiently managing its inventory by selling and replacing it almost five times during that year. However, there was a notable decrease in the inventory turnover ratio in the subsequent years, with ratios of 4.02 in 2020, 2.65 in 2021, and 2.90 in 2022.

In 2023, the inventory turnover ratio for Cadence further declined to 2.39. This decrease indicates that the company's efficiency in managing its inventory has decreased compared to the prior year. A lower inventory turnover ratio could imply that Cadence may be carrying excess inventory or facing challenges in selling its products efficiently.

Overall, the declining trend in Cadence's inventory turnover ratio over the years raises potential concerns about inventory management practices. Further analysis of the company's inventory levels, sales trends, and supply chain efficiency may be necessary to address the underlying reasons behind the declining inventory turnover ratios.