Synopsys Inc (SNPS)
Activity ratios
Short-term
Turnover ratios
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 3.75 | 5.02 | 3.76 | 4.13 | 5.32 |
| Receivables turnover | 5.80 | 6.03 | 6.96 | 4.43 | 5.68 |
| Payables turnover | 7.84 | 28.30 | 31.44 | 26.49 | 38.00 |
| Working capital turnover | 13.12 | 21.34 | 10.65 | 9.00 | — |
The activity ratios of Synopsys, Inc. provide insights into the efficiency of its operations in managing inventory, receivables, payables, and working capital.
The inventory turnover ratio indicates how many times the company's inventory is sold and replaced over a specific period. Synopsys' inventory turnover has exhibited a declining trend over the last five years, decreasing from 5.32 in 2019 to 3.75 in 2023. This may indicate that the company is holding onto its inventory for a longer period, which could tie up its funds and lead to potential obsolescence or storage costs.
The receivables turnover ratio measures how efficiently the company collects on its credit sales. Synopsys has shown a relatively consistent receivables turnover ratio over the past five years, although there was a slight decline from 7.40 in 2021 to 6.17 in 2023. This suggests that the company has been effective in collecting payments from its customers.
The payables turnover ratio assesses how quickly Synopsys pays its suppliers. The ratio has fluctuated significantly over the past five years, dropping from 38.00 in 2019 to 7.84 in 2023. A lower ratio may indicate that the company is taking longer to pay its suppliers, potentially leading to strained supplier relationships or missed opportunities for early payment discounts.
The working capital turnover ratio signifies how effectively the company is using its working capital to generate sales. As the data is not available for 2023, it's evident that Synopsys' working capital turnover has been inconsistent, with the ratio reaching its peak in 2022 at 21.34 and showing a declining trend in the years prior.
In conclusion, while Synopsys has displayed reasonable efficiency in collecting on credit sales, its declining inventory turnover and fluctuating payables turnover ratios highlight potential areas for improvement in managing inventory and payables. Additionally, the working capital turnover trend suggests varying levels of effectiveness in utilizing working capital to generate sales.
Average number of days
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 97.24 | 72.72 | 97.00 | 88.34 | 68.60 |
| Days of sales outstanding (DSO) | days | 62.91 | 60.50 | 52.45 | 82.37 | 64.30 |
| Number of days of payables | days | 46.56 | 12.90 | 11.61 | 13.78 | 9.61 |
To analyze Synopsys, Inc.'s activity ratios, we will focus on its days of inventory on hand (DOH), days of sales outstanding (DSO), and number of days of payables.
The days of inventory on hand (DOH) measure how long it takes the company to sell its inventory. Synopsys' DOH has shown an increasing trend over the past five years, from 68.60 days in 2019 to 97.24 days in 2023. This indicates that the company is taking longer to sell its inventory, which may result in higher carrying costs and potential obsolescence risks.
The days of sales outstanding (DSO) represent the average number of days it takes the company to collect payment after making a sale. Synopsys' DSO has fluctuated over the years, with a peak of 77.32 days in 2020 and a decline to 59.16 days in 2023. The decrease in DSO suggests the company has been more effective in collecting its receivables, which is a positive sign for cash flow management and liquidity.
The number of days of payables measures how long it takes the company to pay its suppliers. Synopsys' number of days of payables has shown an increasing trend from 9.61 days in 2019 to 46.56 days in 2023. This suggests that the company is taking longer to pay its suppliers, which may indicate a potential strain on its supplier relationships or strategic cash management.
In conclusion, Synopsys, Inc.'s activity ratios reveal differing trends in managing its inventory, receivables, and payables. The increasing DOH and DSO may prompt the company to reassess its inventory management and credit policies, while the rising number of days of payables signals potential changes in its working capital management or supplier relations.
See also:
Synopsys Inc Short-term (Operating) Activity Ratios
Long-term
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 10.48 | 10.51 | 8.90 | 7.62 | 7.82 |
| Total asset turnover | 0.57 | 0.54 | 0.48 | 0.46 | 0.52 |
The long-term activity ratios of Synopsys, Inc. provide insights into the company's efficiency in utilizing its fixed and total assets to generate sales.
The fixed asset turnover ratio indicates how efficiently the company is using its fixed assets to generate revenue. Synopsys, Inc. has shown a consistent improvement in this ratio from 2019 to 2023, with a notable increase from 7.82 in 2019 to 10.48 in 2023. This suggests that the company has been able to generate more sales per dollar of investment in fixed assets over the years. A higher fixed asset turnover ratio is generally indicative of improved operational efficiency and effective management of fixed assets.
In contrast, the total asset turnover ratio reflects the company's ability to generate sales in relation to its total assets. Synopsys, Inc. has also shown an upward trend in this ratio, indicating an improvement in overall asset utilization efficiency. The total asset turnover ratio has increased from 0.52 in 2019 to 0.57 in 2023, suggesting that the company has been more effective in generating sales in relation to its total assets.
Overall, the increasing trend in both the fixed asset turnover and total asset turnover ratios indicates that Synopsys, Inc. has been managing its assets efficiently, resulting in improved sales generation from both fixed and total assets over the years. This may reflect strong operational performance and effective asset management within the company.