Cognizant Technology Solutions Corp Class A (CTSH)

Cognizant Technology Solutions Corp. has shown consistent liquidity strength over the past five years as reflected in its current, quick, and cash ratios. The current ratio measures the company's ability to meet short-term obligations with its current assets. Cognizant's current ratio has been relatively stable over the years, ranging from 1.94 to 2.25. A current ratio above 1 indicates that the company has more current assets than current liabilities, with higher values suggesting a better ability to cover short-term obligations.

Similarly, the quick ratio, which excludes inventory from current assets to provide a more conservative measure of liquidity, also demonstrates a stable trend for Cognizant, ranging from 1.94 to 2.25 over the same period. A quick ratio above 1 indicates that the company can meet its short-term liabilities without relying on inventory sales.

The cash ratio, which is the most conservative liquidity measure as it considers only cash and cash equivalents to current liabilities, has also shown stability for Cognizant, ranging from 1.04 to 1.46. A cash ratio above 1 indicates that the company holds sufficient cash to cover its immediate liabilities.

Overall, the liquidity ratios suggest that Cognizant Technology Solutions Corp. has maintained a strong liquidity position, with consistently healthy levels of current assets relative to current liabilities, ensuring the company's ability to meet its short-term obligations efficiently and effectively over the past five years.

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Additional liquidity measure

The cash conversion cycle of Cognizant Technology Solutions Corp. has shown fluctuating trends over the past five years. In 2023, the company's cash conversion cycle increased to 62.88 days from 60.76 days in 2022, indicating a potential slowdown in the efficiency of its cash management. Comparing to 2021, the cash conversion cycle increased further, suggesting that the company took longer to convert its investments in inventory and accounts receivable into cash during the year.

In 2020, there was a significant improvement in the cash conversion cycle, decreasing to 54.36 days from 62.61 days in 2019. This improvement could be attributed to more effective inventory management and collection of receivables, resulting in a shorter period for the company to convert its resources into cash.

Overall, the trend in Cognizant's cash conversion cycle suggests some variability in the efficiency of its working capital management over the five-year period. Further analysis would be required to determine the specific factors influencing these fluctuations and to assess the potential impact on the company's financial performance and liquidity.