Automatic Data Processing Inc (ADP)
Solvency ratios
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.06 | 0.06 | 0.05 | 0.06 | 0.03 |
| Debt-to-capital ratio | 0.40 | 0.46 | 0.48 | 0.34 | 0.15 |
| Debt-to-equity ratio | 0.66 | 0.85 | 0.93 | 0.53 | 0.17 |
| Financial leverage ratio | 11.95 | 14.53 | 19.55 | 8.60 | 6.81 |
The solvency ratios of Automatic Data Processing Inc show consistency and improvement over the past five years, indicating a strong financial position. The debt-to-assets ratio has remained relatively low and stable, ranging from 0.03 to 0.06, suggesting that the company utilizes a conservative level of debt to finance its assets.
The debt-to-capital and debt-to-equity ratios have also shown a positive trend, signaling that the company relies more on equity financing than debt. The decreasing trend in these ratios from 2022 to 2024 reflects a reduction in the proportion of debt relative to capital and equity, which is a positive sign for long-term solvency.
Furthermore, the financial leverage ratio, which measures the company's reliance on debt to finance its operations, has shown a declining trend over the years. This indicates that Automatic Data Processing Inc has been reducing its financial leverage and becoming less dependent on debt for funding its business activities.
Overall, the solvency ratios of Automatic Data Processing Inc demonstrate a prudent debt management strategy, strong financial health, and an improving ability to meet its long-term financial obligations.
Coverage ratios
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | -23.37 | 18.52 | 47.45 | 57.30 | 30.72 |
Interest coverage is a financial ratio that indicates a company's ability to cover its interest expenses with its operating income. A higher interest coverage ratio implies a healthier financial position.
Looking at the trend for Automatic Data Processing Inc's interest coverage over the past five years, we observe fluctuations.
In Jun 30, 2024, the interest coverage ratio stood at -23.37, indicating that the company's operating income was not sufficient to cover its interest expenses, which is an alarming sign. This significant decrease from the previous year's ratio of 18.52 raises concerns about the company's financial health and its ability to meet its interest obligations.
In Jun 30, 2023, the interest coverage ratio improved to 18.52, suggesting that the company had ample operating income to cover its interest expenses. This indicates a strong financial position compared to the negative coverage in the following year.
In Jun 30, 2022, the interest coverage ratio surged to 47.45, demonstrating a robust ability to cover interest payments with operating income, which is a positive indication of financial strength.
In Jun 30, 2021, the interest coverage ratio further increased to 57.30, showcasing a continued improvement in the company's financial stability and ability to meet its interest obligations comfortably.
In Jun 30, 2020, the interest coverage ratio decreased slightly to 30.72, but still remained at a healthy level, indicating that the company had sufficient operating income to cover its interest expenses.
Overall, while the interest coverage ratio exhibited fluctuations over the past five years, with both highs and lows, the company has generally shown a strong ability to cover its interest payments with its operating income, except for the worrying negative ratio in 2024. Further analysis would be needed to understand the reasons behind such fluctuations to assess the company's long-term financial health accurately.