Automatic Data Processing Inc (ADP)

Debt-to-capital ratio

		Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Long-term debt	US$ in thousands	2,991,300	2,989,000	2,987,100	2,985,000	1,002,800
Total stockholders’ equity	US$ in thousands	4,547,600	3,509,100	3,225,300	5,670,100	5,752,200
Debt-to-capital ratio		0.40	0.46	0.48	0.34	0.15

June 30, 2024 calculation

Debt-to-capital ratio = Long-term debt ÷ (Long-term debt + Total stockholders’ equity)
= $2,991,300K ÷ ($2,991,300K + $4,547,600K)
= 0.40

The debt-to-capital ratio of Automatic Data Processing Inc has exhibited fluctuations over the past five years. The ratio decreased from 0.48 in June 2022 to 0.34 in June 2021, indicating a reduction in the proportion of debt relative to total capital during this period. However, the ratio increased to 0.46 in June 2023 and further to 0.40 in June 2024, suggesting an upward trend in leveraging with higher debt financing compared to capital.

The ratio of 0.15 in June 2020 was notably lower than subsequent years, indicating a conservative capital structure with a lower reliance on debt. On the other hand, the recent increase in the ratio suggests a shift towards a higher reliance on debt to fund operations or growth initiatives.

It is important to note that a higher debt-to-capital ratio implies higher financial risk due to increased leverage, which can potentially impact the company's financial stability and flexibility. Therefore, monitoring this ratio over time is crucial for assessing the company's capital structure and financial risk management strategies.