Automatic Data Processing Inc (ADP)
Solvency ratios
| Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | 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 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 8.62 | 9.64 | 12.62 | 9.26 | 11.95 | 13.87 | 13.21 | 14.20 | 14.53 | 16.21 | 18.23 | 18.00 | 19.55 | 17.19 | 11.70 | 11.21 | 8.60 | 9.59 | 8.36 | 7.30 |
The analysis of Automatic Data Processing Inc.’s (ADP) solvency ratios, based on the provided data, indicates a consistent financial structure characterized by negligible or zero reported debt levels across multiple periods. Specifically, the Debt-to-Assets Ratio, Debt-to-Capital Ratio, and Debt-to-Equity Ratio are all recorded as zero throughout the entire timeline from September 2020 through June 2025. This persistent pattern suggests that ADP has maintained either no debt or amounts so insignificant that they are not reflected in these ratios during the periods covered. Such a scenario typically points to an internally financed, highly conservatively leveraged or unleveraged company in terms of external debt.
On the other hand, the Financial Leverage Ratio presents a markedly different perspective. There is a clear and notable variation, with the ratio starting at 7.30 in September 2020 and rising to a peak of approximately 19.55 by June 2022, before showing a decreasing trend to roughly 8.62 by June 2025. This fluctuation suggests periods of increased leverage or capital structure adjustments that are captured in this ratio despite the zero readings in the direct debt ratios.
In summary, the consistent absence of debt in the primary ratios indicates that ADP has generally operated without significant leverage, or that debt has been effectively offset by other form of capital or internal financing. The variability observed in the Financial Leverage Ratio could be reflective of non-debt related leverage factors or accounting practices that influence the ratio. Overall, these ratios collectively portray a company with a very low or nonexistent reliance on external debt financing during the analyzed periods.
Coverage ratios
| Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | 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 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest coverage | 12.74 | 12.80 | 12.95 | 13.31 | 14.40 | 14.00 | 14.35 | 16.31 | 18.49 | 25.39 | 27.40 | 34.82 | 46.81 | 51.98 | 53.87 | 56.42 | 57.30 | 56.00 | 50.63 | 39.99 |
The interest coverage ratio for Automatic Data Processing Inc. has demonstrated a declining trend over the analyzed period. At the end of September 2020, the ratio stood at approximately 40.0, reflecting a solid capacity to cover interest expenses multiple times over. This high level of coverage persisted into December 2020 and continued to increase slightly through March and June 2021, reaching peak values of approximately 56.00 and 57.30, respectively. Such elevated ratios indicate that during this period, the company's earnings before interest and taxes (EBIT) significantly exceeded interest obligations, implying strong financial stability and low risk related to interest payments.
However, a noticeable downward trajectory commenced starting in the latter half of 2021. By September 2021, the ratio declined marginally to around 56.42, and the decline accelerated subsequently. By December 2021, it decreased to approximately 54.00, and further reductions ensued through 2022, with the ratio falling to about 34.82 by September 2022. This decline signifies a reduced margin of safety for covering interest expenses, potentially signaling either a decrease in earnings or an increase in interest obligations.
The declining trend persisted into 2023 and beyond, with the interest coverage ratio reaching approximately 16.31 by September 2023. The ratio continued to decline, reaching approximately 12.95 as of December 2023, and maintaining a similar level into the first half of 2024. Although the ratio remained above 10 in the last reported period, the steady decrease indicates a diminishing buffer for interest coverage, which warrants attention as it signifies decreasing earnings relative to interest expenses.
In summary, the data reveals that Automatic Data Processing Inc. initially maintained a robust interest coverage ratio, well above common safety thresholds (typically around 3 to 5). Over time, this ratio has decreased substantially, indicating a reduced margin of safety in meeting interest obligations solely through earnings. This trend underscores a potential shift in the company's financial leverage and earnings capacity, with implications for its financial stability and risk profile in the near to medium term.
See also:
Automatic Data Processing Inc Solvency Ratios (Quarterly Data)