Automatic Data Processing Inc (ADP)

Activity ratios

Short-term

Turnover ratios

	Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Inventory turnover	—	—	—	0.18	0.23
Receivables turnover	5.74	5.60	5.98	5.20	5.50
Payables turnover	59.78	95.55	95.11	79.56	56.92
Working capital turnover	10.42	41.52	—	—	5.67

The activity ratios of Automatic Data Processing Inc. from June 30, 2021, through June 30, 2025, offer insights into the company's operational efficiency and management of current assets and liabilities.

Inventory Turnover: The data indicates a decline in inventory turnover from 0.23 times in 2021 to 0.18 times in 2022. No data are available for 2023 onward, precluding further analysis. The low ratios suggest that the company maintains a relatively high level of inventory relative to sales or that inventory turns over infrequently. The decreasing trend from 2021 to 2022 could imply increased holding periods of inventory or declining inventory management efficiency.

Receivables Turnover: The receivables turnover ratio experienced slight fluctuations, starting at 5.50 times in 2021, decreasing marginally to 5.20 times in 2022, then increasing again to 5.98 times in 2023, followed by modest declines to 5.60 in 2024 and an increase to 5.74 in 2025. This pattern suggests relatively stable receivables collection efficiency, with minor variations indicating a consistent approach to credit and collections over the period.

Payables Turnover: There is a clear upward trend in payables turnover, rising from 56.92 times in 2021 to 79.56 times in 2022 and further to 95.11 in 2023. Slight increases continue into 2024, with a small decline to 59.78 in 2025. The rapid increase from 2021 to 2023 signifies that the company is paying its suppliers more frequently or faster, potentially reflecting improved liquidity, renegotiated payment terms, or strategic payment management. The late decline in 2025 warrants further context but may indicate changes in payment policy or supplier terms.

Working Capital Turnover: Data are available for 2021, 2024, and 2025. The ratio was 5.67 times in 2021, with no data for 2022 and 2023. In 2024, the ratio increased sharply to 41.52, implying significantly improved utilization of working capital to generate sales. However, this ratio then declines to 10.42 in 2025, reflecting a potential reduction in working capital efficiency or a change in sales levels relative to working capital.

Overall, the company's activity ratios demonstrate enhancing efficiency in managing receivables and payables over the observed period, with notably increased payables turnover from 2021 to 2023. The inventory turnover remains low and decreasing, indicating potential for improvement in inventory management. The variability in working capital turnover ratios suggests shifts in working capital utilization, but limited data prevents comprehensive trend analysis across all years.

Average number of days

		Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Days of inventory on hand (DOH)	days	—	—	—	2,063.57	1,586.35
Days of sales outstanding (DSO)	days	63.54	65.16	60.99	70.14	66.34
Number of days of payables	days	6.11	3.82	3.84	4.59	6.41

The activity ratios for Automatic Data Processing Inc. over the specified periods offer insights into the company's operational efficiency and working capital management.

Days of Inventory on Hand (DOH):
In 2021, the company reported an extremely high DOH of approximately 1,586 days, which increased to about 2,064 days in 2022. The data for 2023 onward are unavailable, which restricts further trend analysis. Such elevated DOH figures suggest that the company held inventory for an extended period relative to its sales, implying significant accumulation or slow turnover of inventory. This may indicate inefficiencies in inventory management or that inventory levels are inherently high due to the nature of the company's operations.

Days of Sales Outstanding (DSO):
The DSO decreased from 66.34 days in 2021 to 70.14 days in 2022, indicating a slight slowdown in collection speed during that period, before improving to approximately 61 days in 2023. The subsequent figures for 2024 and 2025 show a gradual increase to around 65.16 and 63.54 days, respectively. Overall, the DSO demonstrates a moderate fluctuation around the 60-70 day range, with some improvement in 2023. This reflects a relatively steady collection cycle, with slight variations that could influence cash flow timing.

Number of Days of Payables:
In 2021, automatic Data Processing Inc. paid its suppliers in about 6.41 days, decreasing to roughly 4.59 days in 2022 and further to approximately 3.84 days in 2023. The subsequent years show a stabilization with payables days marginally increasing to 3.82 days in 2024 and 6.11 days in 2025. The reduction in the payables period from 2021 to 2023 indicates an acceleration in settling obligations or improved cash management. The rise back to around 6 days in 2025 suggests a shift towards more extended payment terms, which could be used strategically to optimize working capital.

Summary:
Overall, the data illustrate a company with historically high inventory levels that continued to increase through 2022 and lack data for subsequent years. The collection period (DSO) shows some flexibility, with a recent improvement in 2023, indicating better receivables management. The payables period has decreased notably from 2021 to 2023, suggesting enhanced creditors management, with a tendency to delay payments in later years. These activity ratios together point toward efforts to optimize working capital, although the extremely high inventory days remain a notable concern for operational efficiency and liquidity management.

Long-term

	Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Fixed asset turnover	—	—	26.43	14.95	13.09
Total asset turnover	0.39	0.35	0.35	0.26	0.31

The analysis of Automatic Data Processing Inc’s long-term activity ratios reveals notable trends over the periods assessed. The Fixed Asset Turnover ratio exhibits a significant upward trajectory, increasing from 13.09 times on June 30, 2021, to 14.95 times on June 30, 2022, and further escalating to 26.43 times by June 30, 2023. This progression suggests an increasing efficiency in utilizing fixed assets to generate revenue over the analyzed period. The substantial rise in this ratio indicates that the company has been improving its fixed asset productivity, possibly through better asset management or enhanced operational efficiencies.

In contrast, the Total Asset Turnover ratio shows a different pattern. It declines from 0.31 in 2021 to 0.26 in 2022, indicating a decrease in overall asset utilization efficiency during that interval. However, the ratio recovers in 2023, reaching 0.35, and is projected to maintain this level through 2024 and 2025 at 0.35 and 0.39, respectively. This stabilization and subsequent improvement suggest that the company has managed to optimize its total asset utilization, enhancing overall efficiency and asset productivity.

Overall, the long-term activity analysis reflects a focused improvement in asset utilization efficiency, particularly in fixed assets, with a noticeable upward trajectory in recent years. These trends imply better management practices and operational efficiencies that have positively affected the company’s ability to generate sales relative to its asset base.