Synopsys Inc (SNPS)

Payables turnover

		Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019
Cost of revenue	US$ in thousands	1,222,190	1,063,700	861,777	794,690	752,946
Payables	US$ in thousands	155,891	37,580	27,413	30,003	19,815
Payables turnover		7.84	28.30	31.44	26.49	38.00

October 31, 2023 calculation

Payables turnover = Cost of revenue ÷ Payables
= $1,222,190K ÷ $155,891K
= 7.84

The payables turnover ratio measures how efficiently a company manages its trade payables by evaluating the number of times a company pays off its average accounts payable balance during a certain period. A higher payables turnover ratio generally indicates a shorter period between purchasing goods or services and paying for them.

Synopsys, Inc.'s payables turnover ratio has fluctuated over the past five years, ranging from 7.84 to 38.00. The significant changes in these ratios may reflect shifts in the company's payment practices or its relationships with suppliers.

In 2019, the payables turnover ratio stood at 38.00, indicating that Synopsys, Inc. paid off its average accounts payable balance 38 times during the year. This high ratio suggests an efficient management of trade payables, potentially indicating favorable payment terms with suppliers or stringent adherence to payment schedules.

In subsequent years, the payables turnover ratio declined, reaching 26.49 in 2020, 31.44 in 2021, and 28.30 in 2022, before dropping further to 7.84 in 2023. These decreases in the ratio indicate a slower pace of paying off trade payables. This may be due to various reasons such as changes in payment terms negotiated with suppliers, higher levels of accounts payable linked to increased business activity, or delays in payment processing.

The sharp decrease in 2023 to a payables turnover ratio of 7.84 is noteworthy and may warrant further investigation. A ratio of this magnitude may indicate prolonged payment cycles or potentially changing supplier relationships that have led to a significant decrease in the frequency of accounts payable turnover.

In conclusion, the declining trend in Synopsys, Inc.'s payables turnover ratio from 2019 to 2023 suggests a potential shift in the management of trade payables. Further analysis of the company's payment practices, supplier relationships, and changes in accounts payable levels may provide insight into the reasons behind these fluctuations.