Automatic Data Processing Inc (ADP)
Liquidity ratios
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.01 | 0.99 | 0.99 | 1.07 | 1.05 |
| Quick ratio | 0.15 | 0.12 | 0.08 | 0.14 | 0.14 |
| Cash ratio | 0.07 | 0.05 | 0.03 | 0.07 | 0.06 |
Automatic Data Processing Inc's liquidity ratios have fluctuated over the past five years.
The current ratio measures the company's ability to cover its short-term obligations with its current assets. ADP's current ratio has varied between 0.99 and 1.07 during this period. In general, a current ratio above 1 indicates that a company can cover its current liabilities with its current assets. ADP's current ratio has mostly been around or slightly below 1, which suggests that the company may have had some difficulty in covering its short-term obligations in certain years.
The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity as it excludes inventory from current assets. ADP's quick ratio has ranged from 0.08 to 0.15. A quick ratio below 1 suggests that the company may have difficulty meeting its short-term obligations without relying on selling inventory. ADP's quick ratio has been consistently low, indicating potential liquidity challenges.
The cash ratio is the most conservative liquidity ratio, measuring the company's ability to cover its current liabilities with cash and cash equivalents. ADP's cash ratio has been between 0.03 and 0.07. A cash ratio below 1 indicates that the company may not be able to cover all of its short-term liabilities with cash on hand. ADP's cash ratio has remained relatively low, suggesting limited ability to cover short-term obligations with cash reserves alone.
In summary, Automatic Data Processing Inc's liquidity ratios, particularly the quick and cash ratios, have shown a consistent pattern of being below industry benchmarks in recent years. This indicates potential liquidity challenges that may require the company to carefully manage its working capital and cash flow to meet its short-term obligations effectively.
See also:
Automatic Data Processing Inc Liquidity Ratios
Additional liquidity measure
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 62.68 | 58.46 | 1,440.72 | 1,110.47 | 1,210.99 |
The cash conversion cycle for Automatic Data Processing Inc has fluctuated significantly over the past five years. In 2024, the company's cash conversion cycle was 62.68 days, which indicates the time it takes for the company to convert its investments in inventory and other resources into cash inflows from sales. This was a slight increase from the previous year which stood at 58.46 days.
In 2022, there was a significant anomaly with a cash conversion cycle of 1,440.72 days, indicating a major inefficiency in the company's working capital management. This was significantly reduced in the following years to 1,110.47 days in 2021 and 1,210.99 days in 2020; however, these figures still represent a prolonged cash conversion cycle.
Overall, the trend shows some volatility in the cash conversion cycle of Automatic Data Processing Inc, with a notable improvement in recent years compared to the significant inefficiency observed in 2022. The company may benefit from further focusing on optimizing its working capital management to enhance cash flow efficiency and overall financial performance.