Synopsys Inc (SNPS)

Cash conversion cycle

		Oct 31, 2024	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020
Days of inventory on hand (DOH)	days	106.06	115.28	72.72	97.00	88.34
Days of sales outstanding (DSO)	days	58.30	62.91	60.50	52.45	82.37
Number of days of payables	days	60.77	54.74	12.90	11.61	13.78
Cash conversion cycle	days	103.58	123.45	120.33	137.84	156.93

October 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 106.06 + 58.30 – 60.77
= 103.58

The cash conversion cycle of Synopsys Inc has shown a decreasing trend over the past five years, indicating an improvement in the company's efficiency in managing its working capital. The cycle measures the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales.

In 2020, the cash conversion cycle was at its highest at 156.93 days, reflecting a longer time taken by the company to convert its resources into cash. However, the cycle has since decreased steadily over the years, reaching its lowest point of 103.58 days in 2024. This suggests that Synopsys Inc has been able to streamline its operations, reduce inventory holding periods, and speed up the collection of receivables.

A shorter cash conversion cycle indicates that the company is managing its working capital more effectively, leading to improved liquidity and potentially higher profitability. It allows the company to free up cash that can be reinvested or used for other operational needs.

Overall, the downward trend in Synopsys Inc's cash conversion cycle over the past five years is a positive signal of the company's operational efficiency and financial health.