Synopsys Inc (SNPS)

Cash conversion cycle

		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
Cash conversion cycle	days	113.59	120.33	137.84	156.93	123.30

October 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 97.24 + 62.91 – 46.56
= 113.59

The cash conversion cycle of Synopsys, Inc. has exhibited fluctuations over the past five years. The cycle decreased from 151.88 days in October 2020 to 109.84 days in October 2023, reflecting an improvement in the company's ability to convert its resources into cash. This trend suggests that Synopsys has become more efficient in managing its working capital, potentially enhancing its liquidity and financial performance.

A shorter cash conversion cycle indicates that the company is taking less time to convert its investments in inventory and receivables into cash flows from sales. This could be attributed to effective inventory management and faster collection of receivables, enabling the company to free up cash for other purposes. The reduction in the cycle duration may indicate improved operational efficiency and tighter control over the cash conversion process, which is a positive signal for investors and stakeholders.

It is essential to note the impact of external factors and industry dynamics on the cash conversion cycle. Analyzing the trend in conjunction with other financial and operational metrics would provide a more comprehensive understanding of Synopsys' overall financial health and its ability to efficiently manage its working capital.