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Microsoft Excel LibreOffice Calc


Analysis of Investments

Difficulty: Advanced


Investment Accounting Policy

All of ADP's marketable securities are considered to be "available-for-sale" and, accordingly, are carried on the Consolidated Balance Sheets at fair value. Unrealized gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of accumulated other comprehensive income (loss) on the Consolidated Balance Sheets until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis and are included in other expense/(income), net on the Statements of Consolidated Earnings.

If the fair value of an available-for-sale debt security is below its amortized cost, ADP assesses whether it intends to sell the security or if it is more likely than not ADP will be required to sell the security before recovery. If either of those two conditions is met, ADP would recognize a charge in earnings equal to the entire difference between the security's amortized cost basis and its fair value. If ADP does not intend to sell a security or it is not more likely than not that it will be required to sell the security before recovery, the unrealized loss is separated into an amount representing the credit loss, which is recognized in earnings, and the amount related to all other factors, which is recognized in accumulated other comprehensive income (loss).

Premiums and discounts are amortized or accreted over the life of the related available-for-sale security as an adjustment to yield using the effective-interest method. Dividend and interest income are recognized when earned.

Source: Automatic Data Processing Inc., Annual Report


Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Automatic Data Processing Inc., adjustment to Net Earnings

USD $ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014 Jun 30, 2013
Net earnings (as reported) hidden hidden hidden hidden hidden hidden
Add: Unrealized net gains (losses) on available-for-sale securities, net of tax hidden hidden hidden hidden hidden hidden
Less: Reclassification of net (gains) losses on available-for-sale securities to net earnings, net of tax hidden hidden hidden hidden hidden hidden
Net earnings (adjusted) hidden hidden hidden hidden hidden hidden

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Automatic Data Processing Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014 Jun 30, 2013
Net Profit Margin
Reported net profit margin hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted net profit margin hidden% hidden% hidden% hidden% hidden% hidden%
Return on Equity (ROE)
Reported ROE hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted ROE hidden% hidden% hidden% hidden% hidden% hidden%
Return on Assets (ROA)
Reported ROA hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted ROA hidden% hidden% hidden% hidden% hidden% hidden%
Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Automatic Data Processing Inc.'s adjusted net profit margin deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. Automatic Data Processing Inc.'s adjusted ROE deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Automatic Data Processing Inc.'s adjusted ROA improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014 Jun 30, 2013
As Reported
Net earnings (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Revenues (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Net profit margin1 hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Revenues (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted net profit margin2 hidden% hidden% hidden% hidden% hidden% hidden%

2018 Calculations

1 Net profit margin = 100 × Net earnings ÷ Revenues
= 100 × hidden ÷ hidden = hidden%

2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Revenues
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Automatic Data Processing Inc.'s adjusted net profit margin deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014 Jun 30, 2013
As Reported
Net earnings (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Stockholders' equity (USD $ in thousands) hidden hidden hidden hidden hidden hidden
ROE1 hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Stockholders' equity (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted ROE2 hidden% hidden% hidden% hidden% hidden% hidden%

2018 Calculations

1 ROE = 100 × Net earnings ÷ Stockholders' equity
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROE = 100 × Adjusted net earnings ÷ Stockholders' equity
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. Automatic Data Processing Inc.'s adjusted ROE deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014 Jun 30, 2013
As Reported
Net earnings (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Total assets (USD $ in thousands) hidden hidden hidden hidden hidden hidden
ROA1 hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Total assets (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted ROA2 hidden% hidden% hidden% hidden% hidden% hidden%

2018 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Automatic Data Processing Inc.'s adjusted ROA improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.