Cognizant Technology Solutions Corp Class A (CTSH)

Cash conversion cycle

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Days of sales outstanding (DSO)	days	72.59	71.50	70.67	69.90	71.32	69.47	71.76	70.62	70.15	71.52	71.67	70.10	67.66	67.94	69.88	69.55	70.81	75.47	75.09	75.51
Number of days of payables	days	7.38	7.07	6.98	7.36	7.98	8.19	7.99	8.96	8.40	8.34	8.55	8.71	9.77	10.59	9.17	7.45	7.67	10.57	16.04	30.00
Cash conversion cycle	days	65.21	64.43	63.69	62.54	63.33	61.28	63.77	61.66	61.75	63.17	63.11	61.39	57.90	57.35	60.71	62.10	63.15	64.90	59.05	45.52

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 been relatively stable over the past eight quarters, ranging from a low of 58.57 days in Q1 2022 to a high of 62.88 days in Q4 2023. This indicates that the company is effectively managing its working capital and liquidity position.

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash received from sales. A lower cash conversion cycle is generally seen as favorable, as it indicates that the company is efficiently managing its cash flow and working capital. In the case of Cognizant, the average cash conversion cycle over the past two years has been around 61 days, suggesting that the company is able to quickly convert its investments into cash.

Overall, the consistent performance of Cognizant's cash conversion cycle reflects its strong financial management practices and efficient working capital management, which is crucial for sustaining and growing the business in the long term.