1.

INTRODUCTION
Cognizant is an American multinational technology company that provides
business consulting, information technology and outsourcing services. It is
headquartered in Teaneck, New Jersey, United States. Their services include
business & technology consulting, systems integration, application
development & maintenance, IT infrastructure services, Artificial Intelligence,
Digital Engineering, analytics, business intelligence, data warehousing,
customer relationship management, supply chain management, engineering &
manufacturing solutions, enterprise resource planning, research and
development outsourcing, and testing solutions.
Cognizant is part of the NASDAQ-100 and trades under CTSH. It was founded as
an in-house technology unit of Dun & Bradstreet in 1994 and started serving
external clients in 1996. Cognizant had a period of fast growth during the
2000s and became a Fortune 500 company in 2011; as of 2021 it's at position
185. Current Market price of Cognizant is $86.29 per share.
In January 2021, the newly rebranded Aston Martin Formula One team
announced Cognizant as their title sponsor for the 2021 Formula One World
Championship.
Cognizant's top competitors includes Wipro, Capgemini, Accenture, Tata
Consultancy Services, HCL Technologies, Infosys,Tech Mahindra, Tata Elxsi &
L&T infotech .

2.Analysis
A) Review the market price of the company and notice the trend
and any particular reason why there was a dip or increase in the
same. (for e.g... bonus issue/covid/ any specific news about the
company which may have led to the same)

 23 AUGUST 2018: Cognizant aquired SaaSfocus to expand cloud

consulting capabilities (rise).
 1 NOVEMBER 2018: Increase in stock as result of 3rd quarterly shows
rose in revenue.
 8 MARCH 2019: Cognizant buys digital automotive engineering R&D
provider, ESG Mobility
 2 MAY 2019: Earning & revenue decrease by 0.12M & 53.46M Resp.
 21 MAY 2019: RISE COZ OF DIVIDENT 0.2
 21 FEB 2020: COVID EFFECT DOWN MARKET OF COGNIZANT
  SLOW AND GRADUAL GROWTH TILL 4TH MAY 2021.
 5 MAY 2021: Cognizant Reports First Quarter 2021 Results. Cognizant
may lose market share as CY21 revenue guidance lags Indian IT peers

B) Look at the current ratio & quick ratio; what do these suggest
about the firm’s liquidity.

 CURRENT RATIO :
The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations
or those due within one year. It tells investors and analysts how a company can maximize the
current assets on its balance sheet to satisfy its current debt and other payables

2018-2019 2019-2020 2020-2021

COGNIZANT 3.17 2.55 1.93

 QUICK RATIO :
The quick ratio is an indicator of a company’s short-term liquidity position and measures a
company’s ability to meet its short-term obligations with its most liquid assets. Since it indicates the
company’s ability to instantly use its near-cash assets (assets that can be converted quickly to cash)
to pay down its current liabilities, it is also called the acid test ratio. An "acid test" is a slang term for
a quick test designed to produce instant results.

2018-2019 2019-2020 2020-2021

COGNIZANT 2.23 1.72 1.94

COMMENT:
Current Ratio trend shows that in 3 years its liabilities are increasing and
assets are decreasing but as the ratio is almost 2 or above(acceptable), it can
satisfy bills and expenses. But on the other hand Company’s becoming less
capable to pay its obligation.
Quick Ratio trend of 3 years also shows decrease in ratio first then slight
increase. The company has to increase the current assets and current liabilities
to make positive working capital as ratio is above 1 but going down as years
are passing. Liquidity of the firm is increasing gradually.
C) Study the account receivables turnover & inventory turnover
ratios. What do these patterns suggest about the firm’s conversion
of account receivables & inventories into cash.
 ACCOUNT RECEIVABLE TURNOVER RATIO :
The receivables turnover ratio is an accounting measure used to quantify a company's effectiveness
in collecting its accounts receivable, or the money owed by customers or clients. This ratio measures
how well a company uses and manages the credit it extends to customers and how quickly that
short-term debt is collected or is paid. A firm that is efficient at collecting on its payments due will
have a higher accounts receivable turnover ratio .

2018-2019 2019-2020 2020-2021

COGNIZANT 5.05 5.15 5.39

COMMENT –
As we can see in above table, we can say that company’s collection of
accounts receivable is efficient and increasing year by year and has a high
proportion of quality customers that pay their debts quickly.
There is no inventory ratio for Cognizant as it is a service provider
company and doesn’t possess inventory.

D) What can you say about the profit margin ratios? Explain any
pattern observed.
Profit margin is the measure of your business's profitability. It is
expressed as a percentage and measures how much of every dollar
in sales or services that your company keeps from its earnings. Profit
margin represents the company's net income when it's divided by
the net sales or revenue. Various ratios are used to determine profit
margin are :-
 Net Profit Margin :-
The net profit margin, or simply net margin, measures how much net income or profit is generated
as a percentage of revenue. It is the ratio of net profits to revenues for a company or business
segment. Net profit margin is typically expressed as a percentage but can also be represented in
decimal form. The net profit margin illustrates how much of each dollar in revenue collected by a
company translates into profit.
 2018-2019 2019-2020 2020-2021
COGNIZANT 13.98% 10.36% 9.48%

 Gross Profit Margin :

Gross profit margin is a metric analysts use to assess a company's financial health by calculating the
amount of money left over from product sales after subtracting the cost of goods sold (COGS).
Sometimes referred to as the gross margin ratio, gross profit margin is frequently expressed as a
percentage of sales.

2018-2019 2019-2020 2020-2021

COGNIZANT 38.48% 35.83% 36.38

 Operating Profit Margin :-

A company's operating profit is its total earnings from its core business functions for a given period,
excluding the deduction of interest and taxes. It also excludes any profits earned from ancillary
investments, such as earnings from other businesses that a company has a part interest in. An
operating loss occurs when core business income ends up being lower than expenses.

2018-2019 2019-2020 2020-2021

COGNIZANT 17.49% 15.91% 13.99%

COMMENTS –
The net profit margin, or simply net margin, measures how
much net income or profit is generated as a percentage of revenue.
As we can see from above trend, ratio decreased from 13.98 to 9.48
indicating that company’s efficiency is reduced of generating sales
into profit.
Gross profit margin is a metric analysts use to assess a
company's financial health. As we see in trend firstly it was 38.48%
and then reduced to 35.83%. now it increased to 36.38 % indicating
that company is trying to increase the pace of revenue after the dip.
A Operating profit is its total earnings from its core business
functions for a given period, excluding the deduction of interest and
taxes. It decreased from 17.49% to 13.99% over span of 3 years
indicating that company has less cash to pay for indirect and other
costs such as interest and one-time expenses.

E) Is the firms return on asset and return on equity satisfactory?

 Return On Asset :-
The term return on assets (ROA) refers to a financial ratio that indicates how profitable a company is
in relation to its total assets. Corporate management, analysts, and investors can use ROA to
determine how efficiently a company uses its assets to generate a profit. The metric is commonly
expressed as a percentage by using a company's net income and its average assets

2018-2019 2019-2020 2021

COGNIZANT 11.58% 7.95% 10.86%

 Return On Equity :-
Return on equity (ROE) can help investors distinguish between companies that are profit creators
and those that are profit burners. On the other hand, ROE might not necessarily tell the whole story
about a company and must be used carefully. Here, we dig deeper into return on equity, what it
means and how it is used in practice.

2019 2020 2021

COGNIZANT 16.79% 12.75% 16.83%

COMMENT ->
ROA is decreasing as years are passing but as sector ROA ratio is 8.7%, so
after 2019-20 the company is going on satisfactory
ROE is going in “V” shape but after looking at sector ROE i.e 7.98%, it is
satisfactory.

F) What do the ratios (Use EPS, PE ratio, dividend yield, dividend

payout ratios) the shareholders are looking at indicate? What is
your overall assessment of the firm profitability?
  EPS :-
Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of its common
stock. The resulting number serves as an indicator of a company's profitability. It is common for a company to
report EPS that is adjusted for extraordinary items and potential share dilution.

2018-2019 2019-2020 2020-2021

COGNIZANT 3.29 2.57 3.54
TATA ELXSI

 PE RATIO :-
The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current
share price relative to its earnings per share (EPS). The price-to-earnings ratio is also sometimes
known as the price multiple or the earnings multiple. P/E ratios are used by investors and analysts to
determine the relative value of a company's shares

2018-2019 2019-2020 2020-2021

COGNIZANT 18.86 29.81 22.90
TATA ELXSI

 DIVIDEND YEILD RATIO:-

The dividend yield, expressed as a percentage, is a financial ratio (dividend/price) that shows how
much a company pays out in dividends each year relative to its stock price.

2018-2019 2019-2020 2020-2021

COGNIZANT 1.29% 1.10% 1.21%
TATA ELXSI

 DIVIDEND PAYOUT RATIO :-

The dividend payout ratio is the ratio of the total amount of dividends paid out to
shareholders relative to the net income of the company. It is the percentage of earnings
paid to shareholders via dividends. The amount that is not paid to shareholders is retained
by the company to pay off debt or to reinvest in core operations. 

2018-2019 2019-2020 2020-2021

COGNIZANT 0.80 0.88 0.94
TATA ELXSI

overall assessment of the firm profitability = SEARCH AUR PEERS K SATH

COMPARISON KARKE LIKHNA HAI
G) Given the company’s risk and future financial needs, how
soundly is it financed?
i. What is the mix of debt & equity?
ii. Does the company generate enough profits to service debt
adequately? (Use debt equity ratio & coverage ratios to support
your views)
 DEBT EQUITY RATIO :-
The debt-to-equity (D/E) ratio is used to evaluate a company's financial leverage and is calculated by
dividing a company’s total liabilities by its shareholder equity. The D/E ratio is an important metric
used in corporate finance. It is a measure of the degree to which a company is financing its
operations through debt versus wholly owned funds. More specifically, it reflects the ability of
shareholder equity to cover all outstanding debts in the event of a business downturn. The debt-to-
equity ratio is a particular type of gearing ratio .

2018-2019 2019-2020 2020-2021

COGNIZANT 0.07 0.15 0.16

 INTEREST COVERAGE RATIO :-

The interest coverage ratio is a debt and profitability ratio used to determine how easily a company
can pay interest on its outstanding debt. The interest coverage ratio is calculated by dividing a
company's earnings before interest and taxes (EBIT) by its interest expense during a given period.

2018-2019 2019-2020 2020-2021

COGNIZANT 1.046 1.08 0.994

COMMENT –
Lower the debt equity ratio, more financially sound company is and in
profit, as ratio is increasing because total liabilities are increasing and total
equity is increasing. Higher amount of financing from debtors is the thing we
can interpret.
Interest Coverage is a ratio that determines how easily a company can
pay interest expenses on outstanding debt. But looking at ratio we can say that
it decreased and in 2020-21 its below 1 that its interest expenses is more than
EBIT.
 After looking at both the ratios we can say that company is generating
on border profit to meet up expenses and cover outstanding debts.

H) How effectively does the company utilize its fixed assets in

generating sales?
 ASSET TURNOVER RATIO:
The asset turnover ratio measures the efficiency of a company's assets in generating revenue or
sales. It compares the dollar amount of sales (revenues) to its total assets as an annualized
percentage. Thus, to calculate the asset turnover ratio, divide net sales or revenue by the average
total assets. One variation on this metric considers only a company's fixed assets (the FAT ratio)
instead of total assets.

2018-2019 2019-2020 2020-2021

COGNIZANT 1.04 1.05 1.01

COMMENT :-
Asset Turnover measures how quickly a company turns over its asset
through sales. As we see the ratio is slightly above one which indicates that the
net sales of a company equals the average total assets.

THANK YOU.