Automatic Data Processing Inc (ADP)

Interest coverage

		Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	1,815,800	5,154,600	4,947,900	4,814,300	4,691,100	4,408,600	4,214,600	4,028,000	3,886,100	3,770,500	3,641,900	3,559,900	3,420,900	3,253,300	3,270,300	3,290,900	3,289,600	3,409,900	3,319,400	3,231,900
Interest expense (ttm)	US$ in thousands	361,300	366,100	341,700	293,800	253,400	173,100	153,200	114,600	81,900	72,600	67,700	63,200	59,800	58,100	64,600	82,300	107,100	125,200	126,900	133,900
Interest coverage		5.03	14.08	14.48	16.39	18.51	25.47	27.51	35.15	47.45	51.94	53.79	56.33	57.21	55.99	50.62	39.99	30.72	27.24	26.16	24.14

June 30, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $1,815,800K ÷ $361,300K
= 5.03

The interest coverage ratio for Automatic Data Processing Inc has shown a generally upward trend over the past few quarters, indicating the company's ability to meet its interest obligations comfortably. The ratio has consistently been well above 1, which suggests that the company's operating income is sufficient to cover its interest expenses multiple times over.

In recent periods, the interest coverage ratio has been relatively high, ranging from around 50 to over 50 times. This indicates a strong financial position and low financial risk for the company. A higher interest coverage ratio implies that the company has more than enough earnings to cover its interest payments, providing a cushion against any potential fluctuations in operating performance or interest rates.

Overall, the increasing trend in the interest coverage ratio for Automatic Data Processing Inc demonstrates a solid financial standing and the ability to manage its debt obligations effectively. Investors and stakeholders may view this positively as it reflects the company's financial stability and capacity to service its debt without strain.