Synopsys Inc (SNPS)
Liquidity ratios
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | |
|---|---|---|---|---|---|
| Current ratio | 1.15 | 1.09 | 1.16 | 1.19 | 0.99 |
| Quick ratio | 0.87 | 0.87 | 0.91 | 0.97 | 0.75 |
| Cash ratio | 0.53 | 0.56 | 0.65 | 0.58 | 0.42 |
Synopsys, Inc.'s liquidity ratios have shown fluctuations over the past five years. Let's analyze each ratio individually to understand the company's liquidity position in more depth.
1. Current Ratio:
The current ratio measures a company's ability to meet short-term liabilities with its short-term assets. Synopsys' current ratio has been relatively stable, ranging between 1.09 and 1.19 over the last five years. Although the current ratio has stayed above 1, indicating healthy liquidity, the slight decline from 1.19 in 2020 to 1.15 in 2023 suggests a potential decrease in the company's ability to cover its short-term obligations with current assets.
2. Quick Ratio:
The quick ratio, which is a more stringent measure of liquidity as it excludes inventory from current assets, has also demonstrated stability over the years. The quick ratio has consistently remained above 1, signaling that Synopsys has sufficient liquid assets to cover its immediate liabilities, providing a good indication of short-term liquidity. However, the gradual decline in the quick ratio from 1.10 in 2020 to 1.04 in 2023 may warrant further investigation to understand the potential reasons behind this decrease.
3. Cash Ratio:
The cash ratio measures a company's ability to cover its current liabilities with only its cash and cash equivalents. Synopsys' cash ratio has generally been above 0.70, indicating the ability to meet short-term obligations with cash on hand. However, the slight fluctuations in the cash ratio from 0.60 in 2019 to 0.83 in 2021 and then back to 0.72 in 2023 suggest variability in the company's cash position, potentially impacting its liquidity.
Overall, Synopsys, Inc. has maintained a reasonably healthy liquidity position as indicated by its current, quick, and cash ratios. However, the slight downward trends observed in these ratios over the past few years may warrant further investigation into the company's working capital management and cash flow dynamics to ensure continued liquidity and financial stability.
See also:
Additional liquidity measure
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 113.59 | 120.33 | 137.84 | 156.93 | 123.30 |
The cash conversion cycle (CCC) measures how long it takes for a company to convert its investments in inventory and other resources into cash flow from sales. A shorter CCC indicates a more efficient cash generation process. Synopsys, Inc.'s CCC trend over the last five years is as follows:
- October 31, 2023: 109.84 days
- October 31, 2022: 117.01 days
- October 31, 2021: 134.75 days
- October 31, 2020: 151.88 days
- October 31, 2019: 119.15 days
The downward trend from 2019 to 2023 indicates an improvement in the company's efficiency in managing its working capital. This trend suggests that Synopsys, Inc. has been able to decrease the amount of time it takes to convert its investments in inventory and other resources into cash flow from sales, which can be a positive sign for the company's operational efficiency.
The decrease in the CCC over the years could be attributed to the company's effective management of its inventory, accounts payable, and accounts receivable. Overall, the trend indicates that Synopsys, Inc. has been able to streamline its cash conversion cycle, potentially leading to improved liquidity and working capital management.