Cadence Design Systems Inc (CDNS)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	1,471,820	1,273,890	1,068,300	785,415	653,497
Interest expense	US$ in thousands	75,999	36,185	22,934	16,980	20,749
Interest coverage		19.37	35.20	46.58	46.26	31.50

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,471,820K ÷ $75,999K
= 19.37

The interest coverage ratio for Cadence Design Systems Inc has shown a consistent improvement over the years, indicating the company's strong ability to cover its interest expenses with its operating income.

As of December 31, 2020, the interest coverage ratio stood at a healthy 31.50, demonstrating the company's solid financial position. Subsequently, for the years ending December 31, 2021 and 2022, the interest coverage ratio increased even further to 46.26 and 46.58 respectively, highlighting the company's improved capacity to meet its interest obligations comfortably.

However, there was a slight decline in the interest coverage ratio to 35.20 by December 31, 2023. This decrease may indicate a potential slight strain on the company's ability to cover its interest expenses compared to the previous year.

Furthermore, by December 31, 2024, the interest coverage ratio dropped to 19.37, which may raise some concerns about Cadence Design Systems Inc's ability to easily meet its interest payments out of its operating income. Management should closely monitor this ratio to ensure it does not fall further, as a declining interest coverage ratio could indicate financial distress or an increased risk of default.

Overall, the trend of the interest coverage ratio for Cadence Design Systems Inc has been positive, with some fluctuations in recent years. It is essential for investors and stakeholders to keep a close eye on this ratio to assess the company's financial health and its ability to service its debt obligations.