I am trying to evaluate few Canadian telecommunication companies from the investment perspective. I am reading that one of the indicators that is advisable to evaluate is Cash Conversion Cycle (CCC). One of the factors for the calculation of this indicator is COGS (Cost of Goods Sold), however no companies that I am evaluating (Telus, Rogers) list this in their Income Statements.

I think it may be because these companies don't produce any material items. Is my assumption correct and if it is, how can I calculate CCC for this type of companies?

Thank you.

  • "I think it may be because these companies don't produce any material items." What material items do they produce? None that I can think of. – RonJohn Dec 31 '20 at 4:26
  • Agreed. How (if at all possible) can CCC be calculated for such companies? – myroslav Dec 31 '20 at 4:50
  • For a service company (this includes retailers), I'd set COGS to 1. – RonJohn Dec 31 '20 at 4:59
  • Thanks for the suggestion. It does make sense to do this when comparing the service companies, as long as this idea is applied to all companies under research. I have actually found out that Morningstar uses Cost of Revenue when calculating component of CCC for the telecommunication companies. – myroslav Dec 31 '20 at 16:41

From further research, I have found that different financial services companies - Morningstar, MarketWatch etc. use different ways of addressing it.

Morningstar, for example, uses Cost of Revenue and includes only Goods and Services Purchased from operating expenses while calculating components of CCC.

MarketWatch, on the contrary, still uses COGS term but bunches together all operating expenses into it.

So in summary, it appears that any of the following can be used in calculations of CCC as long as uniformity is upheld during the comparison of the companies under research:

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