Cadence Design Systems Inc (CDNS)

Working capital turnover

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Revenue	US$ in thousands	4,641,260	4,089,990	3,561,720	2,988,240	2,682,890
Total current assets	US$ in thousands	4,016,080	1,976,220	1,706,770	1,715,770	1,478,590
Total current liabilities	US$ in thousands	1,370,100	1,590,870	1,347,700	971,225	796,808
Working capital turnover		1.75	10.61	9.92	4.01	3.94

December 31, 2024 calculation

Working capital turnover = Revenue ÷ (Total current assets – Total current liabilities)
= $4,641,260K ÷ ($4,016,080K – $1,370,100K)
= 1.75

The working capital turnover for Cadence Design Systems Inc has shown a significant increase over the past few years, reflecting the company's ability to efficiently utilize its working capital to generate sales.

In 2020, the working capital turnover stood at 3.94, indicating that the company generated $3.94 in revenue for every dollar of working capital invested. This ratio increased slightly to 4.01 in 2021, suggesting a slightly improved efficiency in working capital management.

The most notable improvement occurred in 2022, where the working capital turnover surged to 9.92, followed by a further increase to 10.61 in 2023. These spikes indicate a substantial enhancement in the company's working capital utilization efficiency, implying that Cadence Design Systems Inc was able to generate almost ten times its working capital amount in sales revenue during those years.

However, in 2024, the working capital turnover dropped to 1.75. This decrease suggests a potential inefficiency in working capital management during this period, as the company generated $1.75 in revenue for every dollar of working capital invested, which is significantly lower compared to the previous years.

In conclusion, while Cadence Design Systems Inc demonstrated impressive improvements in working capital turnover from 2020 to 2023, the significant drop in 2024 raises concerns about the company's ability to efficiently utilize its working capital in generating sales. Further analysis and monitoring of the working capital turnover trend are recommended to assess the company's financial performance accurately.