Automatic Data Processing Inc (ADP)
Solvency ratios
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 8.62 | 11.95 | 14.53 | 19.55 | 8.60 |
The solvency ratios for Automatic Data Processing Inc. across the given period reveal insights into the company's capital structure and financial stability. Notably, the debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio consistently stand at zero for all listed dates from June 30, 2021, through June 30, 2025. This indicates that the company maintains no reported interest-bearing debt over this timeframe, suggesting a funding structure that is entirely equity-financed or possibly financed through internal cash flows and non-interest-bearing liabilities.
Conversely, the financial leverage ratio exhibits significant fluctuation over the same period, with a low of 8.62 on June 30, 2025, and peaks reaching 19.55 on June 30, 2022. The high leverage ratios, particularly in 2022, imply that the company leverages its equity to a substantial degree at times, even in the absence of traditional debt. This may reflect reliance on non-debt financial leverage, such as operating leases or other off-balance-sheet arrangements, or it could be the result of specific accounting practices affecting reported leverage.
Overall, the absence of debt-related ratios indicates that Automatic Data Processing Inc. maintains a conservative approach to leverage, favoring an unencumbered balance sheet. However, the variability in the financial leverage ratio suggests periods of increased operational or non-debt financial leverage that warrant further investigation to understand their impact on financial stability and risk profile.
Coverage ratios
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | |
|---|---|---|---|---|---|
| Interest coverage | 12.63 | 14.32 | 18.22 | 45.08 | 57.30 |
The interest coverage ratio for Automatic Data Processing Inc. (ADP) over the period from June 30, 2021, to June 30, 2025, demonstrates a significant decline, indicating evolving financial risk considerations for the company.
In the fiscal year ending June 30, 2021, the company's interest coverage ratio was exceptionally high at 57.30. This suggests that ADP had an abundant level of earnings relative to its interest obligations, implying a robust capacity to service its debt with ease. Such a high ratio generally indicates conservative leverage and strong profitability.
By June 30, 2022, the ratio decreased noticeably to 45.08. Although still very high, the decline indicates a reduction in the relative safety margin for debt servicing. The company continued to generate sufficient earnings to cover its interest expenses comfortably, but the margin of safety had diminished compared to the previous year.
The trend accelerated significantly by June 30, 2023, with the ratio dropping further to 18.22. This substantial decrease marks a considerable reduction in the company's ability to cover interest expenses purely from earnings, highlighting a potential increase in financial leverage or a decline in profitability.
The decline persisted in the subsequent years, with the ratio reaching 14.32 in June 2024 and further decreasing to 12.63 in June 2025. Although these numbers still reflect a capacity to meet interest obligations, the narrowing buffer indicates heightened financial leverage or decreasing earnings before interest and taxes (EBIT).
Overall, the decline in ADP's interest coverage ratio over this period underscores a trend toward tighter financial margins with respect to debt servicing. While the ratios remain above generally critical thresholds (such as below 3 or 5, which often signal more immediate concern), the considerable reduction warrants monitoring. It suggests that future earnings growth or restructuring might be necessary to ensure continued financial stability and to mitigate increased refinancing risk associated with lower interest coverage.