Synopsys Inc. (NASDAQ:SNPS)

Solvency ratios for the analyzed period demonstrate a period of consistent financial stability followed by a notable shift in leverage beginning in early 2024. Initially, the company maintained a conservative capital structure with low levels of debt relative to equity, capital, and assets. However, recent quarters reveal a significant increase in debt utilization, impacting several key solvency metrics.

Debt to Equity

From January 2021 through October 2023, the debt to equity ratio remained consistently low, fluctuating between 0.00 and 0.03. A substantial increase is observed in January 2025, reaching 1.01, followed by 0.52 and 0.48 in subsequent quarters. This indicates a considerable rise in the proportion of debt financing relative to shareholder equity.

Debt to Equity (Including Operating Lease Liability)

This ratio exhibited relative stability between 0.11 and 0.14 from January 2021 to October 2023. Similar to the standard debt-to-equity ratio, a marked increase is evident starting in January 2025, peaking at 1.08 and then decreasing to 0.55 and 0.50 in the following quarters. The inclusion of operating lease liabilities amplifies the observed increase in leverage.

Debt to Capital

The debt to capital ratio mirrored the trend of the debt to equity ratio, remaining near 0.02 until the beginning of 2024. A significant jump to 0.50 in January 2025 is followed by declines to 0.34 and 0.32, suggesting increased reliance on debt within the company’s capital structure.

Debt to Capital (Including Operating Lease Liability)

This ratio followed a similar pattern to the debt to capital ratio, with a substantial increase to 0.52 in January 2025, followed by 0.35 and 0.34 in subsequent quarters. The inclusion of operating lease liabilities contributes to the higher leverage observed.

Debt to Assets

The debt to assets ratio remained consistently low, below 0.02, through October 2023. A substantial increase is observed in January 2025, reaching 0.42, followed by 0.30 and 0.28, indicating a growing proportion of assets financed by debt.

Debt to Assets (Including Operating Lease Liability)

This ratio exhibited a similar trend to the standard debt-to-assets ratio, with a significant increase to 0.45 in January 2025, followed by 0.31 and 0.30. The inclusion of operating lease liabilities results in a higher ratio compared to the standard debt-to-assets calculation.

Financial Leverage

Financial leverage remained relatively stable around 1.65-1.71 from January 2021 to October 2023. A substantial increase to 2.40 is observed in January 2025, decreasing to 1.75 and 1.70 in subsequent quarters. This indicates a significant amplification of returns to equity holders through the use of debt, but also increased financial risk.

Interest Coverage

Interest coverage ratios are unavailable for the majority of the analyzed period. However, values are present from January 2024 onwards. A substantial decline is observed from 852.56 in January 2024 to 4.12 in October 2025, indicating a decreasing ability to cover interest expenses with earnings. This decline coincides with the increase in debt levels.

In summary, the company demonstrated a strong solvency position for much of the analyzed period. However, the recent increase in debt utilization, beginning in early 2024, has significantly altered its capital structure and increased financial leverage. The declining interest coverage ratio suggests a potential strain on the company’s ability to service its debt obligations as leverage increases.

The debt to equity ratio for the analyzed period demonstrates a significant shift in the company’s financial leverage. Initially, the ratio was very low, indicating a conservative capital structure with a substantially larger equity base relative to debt. However, a dramatic increase is observed in later periods, suggesting a considerable change in financing strategy.

Initial Period (Jan 31, 2021 – Oct 31, 2022)

From January 31, 2021, through October 31, 2022, the debt to equity ratio remained consistently low, fluctuating between 0.02 and 0.03. This indicates a very strong equity position and minimal reliance on debt financing. Total debt decreased steadily during this timeframe, while stockholders’ equity experienced modest growth.

Transition Period (Jan 31, 2023 – Oct 31, 2024)

The ratio remained at zero from January 31, 2023, through October 31, 2024, indicating a period where the company operated with virtually no debt relative to its equity. Stockholders’ equity continued to increase during this period, further solidifying the company’s financial position.

Significant Shift (Jan 31, 2025 – Oct 31, 2025)

A substantial and abrupt change occurred beginning January 31, 2025. The debt to equity ratio increased dramatically to 1.01 in April 2025, then decreased to 0.52 in July 2025, and finally settled at 0.48 in October 2025. This represents a significant increase in debt financing, although equity also increased substantially during this period. The increase in debt is far more pronounced than the increase in equity, leading to the elevated ratio. The values for total debt and total stockholders’ equity in these periods are exceptionally large, suggesting a major corporate action such as an acquisition or significant capital raise.

The observed trend suggests a transition from a highly conservative financial structure to one with increased leverage. While the ratio remains below 1.0 in the most recent periods, the substantial increase warrants further investigation to understand the underlying reasons and potential implications for the company’s financial risk profile.

The debt to equity ratio, including operating lease liability, for the analyzed period demonstrates a period of relative stability followed by a significant increase. From January 2021 through October 2023, the ratio fluctuated within a narrow range, indicating a consistent financial leverage position. However, subsequent quarters reveal a substantial shift in this leverage.

Historical Trend (Jan 2021 – Oct 2023)

The debt to equity ratio began at 0.13 in January 2021, increased slightly to 0.14 in April 2021, and then remained relatively stable, oscillating between 0.11 and 0.13 throughout the observed period. This suggests a consistent approach to financing with a moderate reliance on debt relative to equity.

Significant Increase (Jan 2024 – Oct 2025)

Starting in January 2025, the ratio experienced a dramatic increase. It rose to 1.08, then decreased to 0.55 in April 2025, and further to 0.50 in July 2025, before stabilizing at 0.50 in October 2025. This indicates a substantial increase in debt relative to equity, potentially due to significant borrowing or a decrease in equity.

Underlying Values

The increase in the debt to equity ratio correlates with a substantial increase in reported total debt, particularly evident from January 2025 onwards. Simultaneously, while total stockholders’ equity also increased, the rate of increase was insufficient to offset the growth in total debt. This disparity is the primary driver of the observed ratio change.

Ratio Range

Prior to January 2025, the ratio remained below 0.14, suggesting a conservative capital structure. The subsequent values exceeding 0.50 represent a notable departure from this historical pattern and indicate a more leveraged financial position.

The observed trend suggests a strategic shift in financing activities, potentially involving a significant acquisition, substantial investment, or a change in capital allocation policy. Further investigation into the underlying transactions driving these changes would be necessary to fully understand the implications for the company’s financial risk profile.

The debt to capital ratio demonstrates a significant shift over the observed period. Initially, the ratio remained consistently low and stable, followed by a dramatic increase in later periods.

Initial Stability (Jan 31, 2021 – Oct 31, 2022)

From January 31, 2021, through October 31, 2022, the debt to capital ratio remained remarkably consistent at 0.02. This indicates a very conservative capital structure with minimal reliance on debt financing relative to the company’s total capital. Total debt decreased steadily during this period, while total capital increased, contributing to the stable ratio.

Period of Zero Leverage (Jan 31, 2023 – Oct 31, 2024)

Beginning January 31, 2023, the debt to capital ratio decreased to 0.00 and remained at this level through October 31, 2024. This signifies a period where the company operated with no debt relative to its capital base. Total debt continued to decline, while total capital continued to grow, resulting in the ratio reaching zero.

Significant Increase in Leverage (Jan 31, 2025 – Oct 31, 2025)

A substantial change is observed starting January 31, 2025. The debt to capital ratio increased dramatically to 0.50, then decreased to 0.34 and 0.32 by October 31, 2025. This represents a significant increase in the company’s use of debt financing. The large increases in both total debt and total capital contribute to this change, but the proportional increase in debt is much larger. The values for Jan 31, 2025 for both total debt and total capital appear to be outliers and should be investigated further.

The observed trend suggests a shift in the company’s financial strategy, moving from a highly conservative, debt-free position to one with a more substantial level of debt financing. The magnitude of the increase in the debt to capital ratio in the final period warrants further investigation to understand the underlying reasons and potential implications for the company’s financial risk profile.

The debt to capital ratio, including operating lease liability, exhibited a period of relative stability followed by a significant increase. From January 31, 2021, through October 31, 2023, the ratio remained consistently between 0.10 and 0.12, indicating a stable capital structure with a moderate level of debt relative to equity and other capital sources.

Trend Analysis (Jan 31, 2021 – Oct 31, 2023)

During this period, the ratio fluctuated within a narrow range, suggesting consistent financial leverage policies. The slight decrease from 0.12 in early 2021 to 0.10 in late 2023 could indicate a modest reduction in debt or an increase in capital, but the changes were not substantial.

A substantial shift occurred beginning with the January 31, 2024, reporting period. The ratio increased dramatically to 0.52, then to 0.35 and 0.34 in subsequent quarters. This indicates a significant increase in debt relative to capital. The absolute values for total debt and total capital also show a large increase during this period, confirming the ratio’s trend.

Trend Analysis (Jan 31, 2024 – Oct 31, 2025)

The increase in the debt to capital ratio suggests the entity may have taken on considerable new debt, potentially to fund acquisitions, investments, or other strategic initiatives. Alternatively, a decrease in capital could also contribute to this increase. The ratio’s subsequent decrease from 0.52 to 0.34 suggests a partial correction, but the level remains substantially higher than in prior periods.

Overall, the solvency position, as measured by this ratio, underwent a notable transformation. While initially demonstrating a conservative capital structure, the entity experienced a significant increase in financial leverage in the latter part of the observed period. Further investigation would be required to understand the underlying reasons for these changes and their potential implications for the entity’s financial health.

The debt to assets ratio demonstrates a significant shift over the observed period. Initially, the ratio remained consistently low, indicating a conservative capital structure. However, a substantial increase is evident in later periods, warranting further investigation.

Initial Period (Jan 31, 2021 – Oct 31, 2022)

From January 31, 2021, through October 31, 2022, the debt to assets ratio remained exceptionally stable and low, fluctuating between 0.01 and 0.02. This suggests a minimal reliance on debt financing relative to the company’s asset base during this timeframe. Total debt decreased steadily during this period, while total assets increased, contributing to the consistently low ratio.

Transition and Significant Increase (Jan 31, 2023 – Apr 30, 2025)

Beginning January 31, 2023, the ratio remained at 0.00 for several quarters. A dramatic increase is then observed, reaching 0.42 by January 31, 2025. This represents a substantial change in the company’s financial leverage. The increase is driven by a massive surge in reported total debt, while total assets also increased significantly, though not at the same rate as the debt. The ratio then decreased slightly to 0.30 in April 2025 and 0.28 in July 2025.

Magnitude of Change

The increase from a ratio of 0.00 to 0.42 indicates a considerable shift in the company’s financing strategy. This suggests a deliberate decision to increase debt financing, potentially for acquisitions, investments, or other strategic initiatives. The scale of the debt increase relative to assets is noteworthy and requires further scrutiny to assess the associated risks and benefits.

Recent Trend

The most recent values (July 31, 2025 and October 31, 2025) show a slight decrease in the debt to assets ratio, from 0.30 to 0.28. While still significantly higher than historical levels, this suggests a potential stabilization or early stage of debt management following the substantial increase.

The observed trend necessitates a deeper understanding of the factors driving the increase in debt, including the purpose of the debt, the associated interest rates, and the company’s ability to service the debt obligations. Further analysis should also consider the impact of this increased leverage on the company’s financial flexibility and overall risk profile.

The debt to assets ratio, including operating lease liabilities, remained relatively stable for the period spanning January 31, 2021, through October 31, 2023. However, a significant shift occurred in subsequent quarters, indicating a substantial change in the company’s financial leverage. A detailed examination of the trend reveals a consistent pattern followed by a dramatic increase.

Initial Stability (Jan 31, 2021 – Oct 31, 2023)

From January 31, 2021, to October 31, 2023, the debt to assets ratio consistently registered at 0.08, then 0.07. This suggests a consistent capital structure and a stable relationship between the company’s debt obligations and its asset base during this timeframe. Total debt fluctuated within a relatively narrow range, while total assets exhibited a gradual upward trend, maintaining the ratio’s stability.

Significant Increase (Jan 31, 2024 – Oct 31, 2025)

Beginning January 31, 2024, the debt to assets ratio experienced a dramatic increase. The ratio rose to 0.45 as of January 31, 2025, peaking at 0.45, then decreasing to 0.31 and 0.30 by October 31, 2025. This surge coincides with a substantial increase in reported total debt, specifically from approximately US$687,803 thousand to US$10,742,251 thousand, and then to US$15,140,314 thousand, and finally to US$14,293,418 thousand. Simultaneously, total assets also increased, but not at a rate sufficient to offset the rise in debt. This indicates a significant reliance on debt financing or a major acquisition or restructuring event during this period.

Overall Trend

The overall trend demonstrates a period of financial stability followed by a substantial shift towards increased financial leverage. The consistent ratio in the earlier period suggests a conservative financial approach, while the later increase warrants further investigation to understand the underlying reasons and potential implications for the company’s financial health. The recent decrease in the ratio from January 31, 2025, to October 31, 2025, may indicate a partial correction or debt reduction strategy.

The financial leverage ratio for the analyzed period demonstrates a generally decreasing trend, punctuated by a significant increase in later periods. Throughout the initial timeframe, from January 31, 2021, to October 31, 2022, the ratio remained relatively stable, fluctuating between 1.64 and 1.71. A consistent downward trend then emerges from January 31, 2023, through October 31, 2024, decreasing from 1.58 to 1.45. However, a substantial increase is observed from October 31, 2024, to April 30, 2025, rising to 2.40, before decreasing slightly to 1.75 by July 31, 2025, and remaining at 1.70 by October 31, 2025.

Financial Leverage Trend (2021-2022)

From January 2021 through October 2022, the financial leverage ratio exhibited minimal variation, consistently hovering around 1.65-1.71. This suggests a stable capital structure during this period, with a relatively consistent proportion of assets financed by equity versus debt.

Financial Leverage Trend (2023-2024)

A clear downward trend in the financial leverage ratio is apparent from January 2023 to October 2024. The ratio decreased from 1.58 to 1.45, indicating a reduction in the proportion of assets financed by equity. This could be attributed to increased profitability leading to greater retained earnings, or potentially a reduction in debt levels.

Financial Leverage Trend (2024-2025)

The period from October 2024 to October 2025 shows a significant shift. The ratio increased dramatically from 1.45 in October 2024 to 2.40 in April 2025. This substantial increase suggests a considerable change in the company’s capital structure, likely involving a significant increase in debt or a decrease in equity. The subsequent slight decrease to 1.70 by October 2025 indicates a partial reversal of this trend, but the ratio remains elevated compared to prior periods.

Asset and Equity Growth

Total assets experienced consistent growth throughout the analyzed period, with a particularly large increase between July 31, 2024, and April 30, 2025. Total stockholders’ equity also grew, but at a slower pace than total assets, especially during the period of rapid asset growth. This disparity in growth rates likely contributed to the observed increase in financial leverage in the latter part of the period.

The observed fluctuations in financial leverage warrant further investigation to understand the underlying drivers of these changes. The substantial increase in leverage during the latter portion of the analyzed period should be examined in conjunction with other financial metrics to assess the potential impact on the company’s financial risk profile.

The interest coverage ratio exhibits a notable trend over the observed period. Prior to January 31, 2023, the ratio is not reported. Beginning in the first quarter of 2023, the ratio is exceptionally high, decreasing substantially over subsequent quarters.

Initial High Coverage (Q1 2023 - Q4 2023)

The interest coverage ratio commenced reporting at 852.56 in January 2023, indicating a very strong ability to meet interest obligations with earnings. This figure decreased to 174.76, 78.90, and 44.06 in subsequent quarters, though remaining at levels generally considered healthy. This decline suggests a reduction in the margin by which earnings exceed interest expenses.

Significant Decline (Q1 2024 - Q4 2025)

The ratio continued its downward trajectory, falling to 31.24 by January 2024. A more pronounced decrease is observed in the following quarters, reaching 11.64 in April 2025. The ratio further declined to 5.50 and 4.12 in July and October 2025, respectively. This substantial reduction warrants further investigation, as it indicates a diminishing capacity to cover interest expenses from current earnings.

Underlying Factors

The decline in the interest coverage ratio appears to be driven by a combination of factors. While earnings before interest and tax (EBIT) fluctuate, the most significant impact appears to stem from a substantial increase in interest expense beginning in January 2023. The interest expense rises dramatically from negligible amounts to 94,336 in April 2025, and ultimately 194,752 in October 2025. This suggests increased borrowing or a change in the terms of existing debt.

Overall, the trend indicates a weakening ability to comfortably cover interest obligations. While the ratio remains positive, the rapid decline necessitates monitoring and potential assessment of the underlying causes, particularly the escalating interest expense.