Cognizant Technology Solutions Corp Class A (CTSH)

Cash conversion cycle

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	—	—	—	—	—
Days of sales outstanding (DSO)	days	72.59	71.32	70.15	67.66	70.81
Number of days of payables	days	7.38	7.98	8.40	9.77	6.06
Cash conversion cycle	days	65.21	63.33	61.75	57.90	64.75

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 72.59 – 7.38
= 65.21

The cash conversion cycle of Cognizant Technology Solutions Corp. has fluctuated over the past five years. The cycle measures the amount of time it takes for the company to convert its investments in inventory and other resources into cash flows from sales. A higher number indicates a longer time for the company to receive cash after investing in its operations.

In 2023, the cash conversion cycle increased to 62.88 days, up from 60.76 days in 2022. This indicates that the company took slightly longer to convert its investments into cash flows from sales in 2023 compared to the previous year.

Looking back further, the cycle was also higher in 2021 at 58.80 days, and in 2019 at 62.61 days, while it was relatively lower in 2020 at 54.36 days. The variations in the cash conversion cycle over these years suggest changes in the company's efficiency in managing its cash flow and working capital.

Analyzing the trend, it is important for Cognizant to monitor its cash conversion cycle closely and work towards optimizing it to improve liquidity and operational efficiency. A lower cash conversion cycle indicates faster cash generation from sales and more effective management of working capital, which can positively impact the company's financial health and performance.