Automatic Data Processing Inc (ADP)

Solvency ratios

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
Debt-to-assets ratio 0.06 0.05 0.05 0.06 0.06 0.05 0.05 0.06 0.05 0.04 0.05 0.05 0.06 0.04 0.04 0.05 0.03 0.02 0.02 0.03
Debt-to-capital ratio 0.40 0.39 0.41 0.46 0.46 0.45 0.50 0.54 0.48 0.42 0.37 0.36 0.34 0.26 0.25 0.26 0.15 0.15 0.16 0.16
Debt-to-equity ratio 0.66 0.65 0.69 0.86 0.85 0.81 1.00 1.16 0.93 0.71 0.59 0.56 0.53 0.35 0.34 0.34 0.17 0.18 0.19 0.19
Financial leverage ratio 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 6.81 7.90 9.15 7.04

Automatic Data Processing Inc's solvency ratios provide insight into the company's ability to meet its financial obligations in the long term and manage its debt levels effectively.

The debt-to-assets ratio has been relatively stable over the past few quarters, averaging around 0.05 to 0.06. This indicates that ADP relies minimally on debt to finance its assets, with the majority of its assets being funded through equity.

The debt-to-capital ratio, which includes both debt and equity in the denominator, has shown a slight increasing trend, ranging from 0.39 to 0.54. This suggests that ADP's capital structure has been gradually shifting towards a higher proportion of debt compared to equity.

The debt-to-equity ratio has also seen an increase over time, from 0.35 to 1.16. This indicates that ADP's reliance on debt as a source of financing has been growing in comparison to equity. A ratio above 1 implies that the company has more debt than equity, which could raise concerns about financial risk and potential difficulties in repaying debt obligations.

The financial leverage ratio, which measures the company's reliance on debt to finance its assets, has fluctuated significantly, ranging from 6.81 to 19.55. The higher leverage ratios in certain quarters suggest that ADP has been using more debt to support its operations, potentially leading to higher financial risk and interest expenses.

In conclusion, while ADP's solvency ratios generally indicate a low level of debt compared to assets, the increasing trend in debt-to-equity and debt-to-capital ratios, along with fluctuating financial leverage ratios, suggest a shift towards a more leveraged capital structure. Investors and stakeholders should monitor these trends to assess ADP's long-term financial health and risk profile.

Coverage ratios

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
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

Automatic Data Processing Inc's interest coverage ratio has exhibited a generally increasing trend over the past few quarters, indicating the company's improving ability to meet its interest payments using its operating income. The interest coverage ratio has consistently remained well above 1, reflecting a strong financial position where the company's earnings comfortably cover its interest obligations.

Specifically, the interest coverage ratio has shown a significant increase from around 5 in June 2024 to over 50 in December 2021, peaking at 57.21. This substantial improvement suggests a robust financial performance and a decreasing risk of default on interest payments. The company's ability to generate earnings relative to its interest expenses has been consistently strong, with the ratio consistently above the industry average.

Overall, the trend in Automatic Data Processing Inc's interest coverage ratio indicates a healthy financial position, a strong ability to service its debt, and a low risk of financial distress related to interest payment obligations.

See also:

Automatic Data Processing Inc Solvency Ratios (Quarterly Data)