Synopsys Inc. (NASDAQ:SNPS)

The liquidity position, as indicated by the current, quick, and cash ratios, demonstrates notable fluctuations over the observed period. Initially, a general decline in these ratios is apparent, followed by a significant improvement in the more recent years.

Current Ratio

The current ratio experienced a slight decrease from 1.19 in 2020 to 1.09 in 2022, suggesting a modestly diminishing ability to cover short-term liabilities with short-term assets. However, a substantial increase to 2.44 is observed in 2024, followed by a decrease to 1.62 in 2025. This indicates a considerable strengthening of the short-term liquidity position in 2024, though some of that improvement was not sustained into 2025.

Quick Ratio

The quick ratio mirrors the trend of the current ratio, declining from 0.94 in 2020 to 0.85 in both 2022 and 2023. Similar to the current ratio, a marked improvement is seen in 2024, rising to 1.88, before decreasing to 1.20 in 2025. This pattern suggests that the company’s ability to meet its immediate obligations using its most liquid assets improved significantly in 2024, but experienced a pullback in 2025.

Cash Ratio

The cash ratio exhibits a similar pattern, fluctuating from 0.58 in 2020 to 0.53 in 2023, indicating relative stability in the proportion of current assets held as cash. A substantial increase to 1.53 is then observed in 2024, followed by a decrease to 0.80 in 2025. This suggests a considerable build-up of cash reserves in 2024, followed by a reduction in 2025, potentially indicating strategic deployment of cash resources.

Overall, the period between 2020 and 2023 shows a gradual weakening in liquidity metrics. The year 2024 represents a significant turning point, with substantial improvements across all three ratios. However, the subsequent decline in these ratios in 2025 suggests that the liquidity gains observed in 2024 may not be fully sustained.

The current ratio exhibited fluctuating behavior over the observed period. Initially, the ratio demonstrated a slight decline, followed by an increase, and then a more substantial shift in later years.

Trend Analysis (2020-2025)

From October 31, 2020, to October 31, 2022, the current ratio decreased from 1.19 to 1.09. This indicates a progressively diminishing ability to cover short-term liabilities with short-term assets during this timeframe. A subsequent increase was noted on October 31, 2023, with the ratio reaching 1.15. However, a significant surge occurred by October 31, 2024, with the ratio climbing to 2.44. This represents a substantial improvement in the company’s short-term liquidity position. A decrease was then observed on October 31, 2025, with the ratio settling at 1.62, though still remaining above the levels seen in the earlier part of the period.

The most notable change is the dramatic increase in the current ratio in 2024. This suggests a significant shift in the composition of either current assets or current liabilities, or both, during that year. The subsequent decline in 2025, while representing a decrease from the peak, still indicates a relatively strong liquidity position compared to the 2020-2023 period.

Comparative Values

The lowest observed current ratio was 1.09 in 2022, while the highest was 2.44 in 2024. The ratio in 2025, at 1.62, remains considerably higher than the ratios recorded between 2020 and 2023.

Overall, the company’s ability to meet its short-term obligations, as indicated by the current ratio, has undergone considerable variation. The recent trend suggests an improved liquidity position, although the decrease in 2025 warrants further investigation to determine its underlying causes and potential implications.

The quick ratio exhibited a declining trend from 2020 through 2022, followed by a significant increase in 2023 and a subsequent decrease in 2024, before stabilizing in 2025. This indicates fluctuating short-term liquidity over the analyzed period.

Overall Trend

From 2020 to 2022, the quick ratio decreased from 0.94 to 0.85, suggesting a weakening ability to meet short-term obligations with highly liquid assets. However, a substantial improvement occurred in 2023, with the ratio jumping to 1.88. This was followed by a decrease to 1.20 in 2024 and a stabilization at 1.20 in 2025.

Quick Ratio Components

Total quick assets increased consistently from 2020 to 2023, growing from US$2,016,362 thousand to US$2,537,519 thousand. A significant jump occurred in 2024, reaching US$4,984,871 thousand, before decreasing to US$4,466,386 thousand in 2025. Current liabilities also increased from 2020 to 2023, rising from US$2,139,922 thousand to US$2,985,451 thousand. In 2024, current liabilities decreased to US$2,650,120 thousand, but increased again to US$3,722,494 thousand in 2025.

Key Observations

The substantial increase in the quick ratio in 2023 appears to be driven by a combination of continued growth in quick assets and a slower rate of increase in current liabilities. The subsequent decline in 2024, despite a large increase in quick assets, is attributable to a more substantial decrease in current liabilities. The increase in current liabilities in 2025, coupled with a slight decrease in quick assets, resulted in a lower, but still improved, quick ratio compared to the 2020-2022 period.

Liquidity Position

A quick ratio below 1.0 from 2020 to 2022 indicates that the entity may have faced challenges in covering its immediate liabilities with its most liquid assets. The ratios above 1.0 in 2023, 2024, and 2025 suggest an improved short-term liquidity position, although the fluctuations warrant further investigation to understand the underlying drivers of these changes.

The cash ratio exhibited fluctuating behavior over the observed period. Initially, the ratio demonstrated an increasing trend, followed by a period of decline, and then a significant surge before stabilizing. This indicates shifts in the company’s ability to cover its current liabilities with only its most liquid assets.

Overall Trend

From 2020 to 2023, the cash ratio experienced a gradual decline from 0.58 to 0.53. This suggests a weakening in the company’s immediate liquidity position during this timeframe. However, a substantial increase to 1.53 was observed in 2024, followed by a decrease to 0.80 in 2025.

Initial Phase (2020-2021)

The cash ratio increased from 0.58 in 2020 to 0.65 in 2021. This improvement suggests an increase in the proportion of current liabilities covered by cash assets during this period. The increase in total cash assets from US$1,235,653 thousand to US$1,580,789 thousand likely contributed to this positive change.

Decline (2021-2023)

Following the peak in 2021, the cash ratio decreased to 0.56 in 2022 and further to 0.53 in 2023. While total cash assets remained relatively stable, the concurrent increase in current liabilities from US$2,413,484 thousand to US$2,985,451 thousand exerted downward pressure on the ratio.

Significant Increase and Subsequent Adjustment (2024-2025)

A dramatic increase in the cash ratio to 1.53 occurred in 2024. This was primarily driven by a substantial rise in total cash assets to US$4,050,401 thousand, while current liabilities decreased to US$2,650,120 thousand. However, the ratio decreased to 0.80 in 2025, coinciding with an increase in current liabilities to US$3,722,494 thousand and a decrease in total cash assets to US$2,960,959 thousand. This suggests a potential shift in asset allocation or increased short-term obligations.

The volatility in the cash ratio highlights the importance of monitoring both cash asset levels and current liability obligations. The significant increase in 2024, followed by a decrease in 2025, warrants further investigation to understand the underlying factors driving these changes.