Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
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Liquidity Ratios (Summary)
Cadence Design Systems Inc., liquidity ratios
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Current ratio | ||||||
| Quick ratio | ||||||
| Cash ratio |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The liquidity position of the company exhibited fluctuations over the five-year period. Initially, liquidity ratios decreased before demonstrating substantial improvement in later years. A clear pattern of strengthening short-term asset coverage of short-term liabilities is observable.
- Current Ratio
- The current ratio decreased from 1.77 in 2021 to 1.27 in 2022 and remained relatively stable at 1.24 in 2023. A significant increase is then noted, rising to 2.93 in 2024 and holding at 2.86 in 2025. This indicates a weakening of the company’s ability to cover current liabilities with current assets in the earlier part of the period, followed by a considerable strengthening in the latter years.
- Quick Ratio
- The quick ratio followed a similar trend to the current ratio, declining from 1.47 in 2021 to 1.02 in both 2022 and 2023. Like the current ratio, the quick ratio experienced a marked improvement, reaching 2.53 in 2024 and 2.51 in 2025. This suggests that the improvement in liquidity was not solely driven by changes in inventory levels, but rather by increases in more liquid assets.
- Cash Ratio
- The cash ratio decreased from 1.13 in 2021 to 0.66 in 2022, then showed a modest recovery to 0.72 in 2023. A substantial increase is observed in 2024, reaching 2.03, and remaining high at 1.93 in 2025. This indicates a significant rise in the proportion of current assets held as cash, further bolstering the company’s immediate ability to meet its short-term obligations.
Overall, the company’s liquidity position improved considerably between 2023 and 2025. The increases in all three ratios suggest a more conservative and secure short-term financial standing.
Current Ratio
Cadence Design Systems Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Current ratio1 | ||||||
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Current Ratio, Sector | ||||||
| Software & Services | ||||||
| Current Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The current ratio exhibited fluctuating behavior over the five-year period. Initial values demonstrated a healthy liquidity position, which subsequently decreased before recovering to a stronger level.
- Overall Trend
- The current ratio began at 1.77 in 2021, indicating a comfortable margin of current assets over current liabilities. A decline was observed in subsequent years, reaching 1.24 in 2023. However, a significant increase occurred in 2024, with the ratio rising to 2.93, and remained elevated at 2.86 in 2025.
- Initial Decline (2021-2023)
- From 2021 to 2023, the current ratio decreased from 1.77 to 1.24. This decline suggests a weakening in the company’s short-term liquidity position. The decrease was likely driven by a faster growth rate in current liabilities compared to current assets during this period. Current liabilities increased from US$971,225 thousand to US$1,590,867 thousand, while current assets only increased from US$1,715,769 thousand to US$1,976,217 thousand.
- Subsequent Improvement (2023-2025)
- Beginning in 2024, the current ratio experienced a substantial improvement. The ratio increased to 2.93, and remained strong at 2.86 in 2025. This improvement is attributable to a significant increase in current assets, which rose from US$1,976,217 thousand in 2023 to US$4,016,079 thousand in 2024 and further to US$4,669,673 thousand in 2025. While current liabilities also increased, the growth in current assets outpaced that of current liabilities, resulting in the improved ratio.
The fluctuations in the current ratio suggest changes in the company’s working capital management or short-term financing strategies. The recent increases indicate a strengthened ability to meet short-term obligations.
Quick Ratio
Cadence Design Systems Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | ||||||
| Receivables, net | ||||||
| Short-term investments | ||||||
| Total quick assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Quick ratio1 | ||||||
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Quick Ratio, Sector | ||||||
| Software & Services | ||||||
| Quick Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The quick ratio exhibited fluctuating performance over the five-year period. Initial values demonstrated a healthy ability to meet short-term obligations, but a subsequent decline was observed before a significant recovery and stabilization.
- Quick Ratio Trend
- The quick ratio began at 1.47 in 2021, indicating a strong capacity to cover current liabilities with highly liquid assets. A decrease followed in 2022, with the ratio falling to 1.02. This level remained consistent in 2023. A substantial increase occurred in 2024, reaching 2.53, and remained high at 2.51 in 2025. This suggests a considerable improvement in the company’s short-term liquidity position in the latter years of the observed period.
- Relationship between Quick Assets and Current Liabilities
- Total quick assets decreased from US$1,432,492 thousand in 2021 to US$1,373,525 thousand in 2022, contributing to the initial decline in the quick ratio. Assets then increased to US$1,627,735 thousand in 2023, but the ratio remained unchanged due to a concurrent rise in current liabilities. Significant growth in quick assets was then observed, reaching US$3,465,115 thousand in 2024 and US$4,100,469 thousand in 2025. Current liabilities increased from US$971,225 thousand in 2021 to US$1,347,696 thousand in 2022 and US$1,590,867 thousand in 2023. However, they decreased to US$1,370,105 thousand in 2024 before rising again to US$1,635,291 thousand in 2025. The substantial increase in quick assets relative to current liabilities in 2024 and 2025 drove the improvement in the quick ratio.
The observed trend suggests that while the company experienced a period of reduced short-term liquidity, it has since strengthened its position, demonstrating an increased ability to meet its immediate obligations. The consistent quick ratio above 2.0 in the final two years indicates a robust liquidity profile.
Cash Ratio
Cadence Design Systems Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | ||||||
| Short-term investments | ||||||
| Total cash assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Cash ratio1 | ||||||
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Cash Ratio, Sector | ||||||
| Software & Services | ||||||
| Cash Ratio, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The cash ratio exhibited considerable fluctuation over the five-year period. Initially, the ratio decreased before stabilizing and then increasing significantly. A review of the underlying components reveals the drivers of these changes.
- Cash Ratio Trend
- The cash ratio began at 1.13 in 2021, indicating the company held $1.13 of cash assets for every $1 of current liabilities. This decreased substantially to 0.66 in 2022, suggesting a diminished ability to cover immediate obligations with available cash. A modest recovery to 0.72 occurred in 2023. However, the ratio experienced a marked increase in 2024, reaching 2.03, and remained high at 1.93 in 2025. This indicates a significantly strengthened short-term liquidity position in the latter two years.
- Total Cash Assets
- Total cash assets decreased from approximately $1.09 billion in 2021 to $887 million in 2022. An increase to $1.14 billion was observed in 2023. Subsequently, cash assets grew substantially, reaching $2.78 billion in 2024 and $3.16 billion in 2025. This growth in cash assets is a primary contributor to the improved cash ratio in the later years.
- Current Liabilities
- Current liabilities increased from $971 million in 2021 to $1.35 billion in 2022 and further to $1.59 billion in 2023. A decrease to $1.37 billion was noted in 2024, followed by an increase to $1.64 billion in 2025. While current liabilities generally trended upward, the rate of increase was outpaced by the growth in cash assets from 2024 onwards, resulting in the improved cash ratio.
The substantial increase in the cash ratio in 2024 and 2025 suggests the company significantly improved its ability to meet short-term obligations with readily available cash. This improvement is attributable to a more rapid growth in cash assets compared to current liabilities during those periods.