Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Automatic Data Processing Inc., liquidity ratios
Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).
- Current Ratio
- The current ratio remained relatively stable over the analyzed period, fluctuating slightly between 1.05 and 1.1. From June 30, 2016 to June 30, 2017, the ratio held steady at 1.1 before experiencing a minor decline to 1.05 in 2018. It maintained this level through 2019 and 2020, followed by a modest increase to 1.07 in 2021. This indicates a consistently adequate level of current assets relative to current liabilities, with no significant liquidity concerns noted.
- Quick Ratio
- The quick ratio exhibited a subtle declining trend from 1.08 in 2016 to a low of 1.03 in 2018 and 2020, highlighting a slight reduction in the company's most liquid assets excluding inventories. A small recovery is observed in 2019 and again in 2021, reaching 1.06. Overall, the quick ratio suggests a generally sound short-term liquidity position, albeit with some minor fluctuations.
- Cash Ratio
- The cash ratio showed a gradual decrease over the period, starting at 1.03 in 2016 and declining to 0.95 by 2020. A slight improvement is visible in 2021, with the ratio rising to 0.98. This trend indicates a modest reduction in the company's absolute cash and cash equivalents relative to current liabilities, although the cash ratio remains close to one, suggesting sufficient cash reserves to cover immediate liabilities.
Current Ratio
Automatic Data Processing Inc., current ratio calculation, comparison to benchmarks
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Current assets | 40,741,800) | 31,564,100) | 34,342,300) | 32,050,000) | 32,658,700) | 39,500,400) | |
| Current liabilities | 38,094,800) | 30,126,600) | 32,627,700) | 30,413,600) | 29,815,900) | 35,847,400) | |
| Liquidity Ratio | |||||||
| Current ratio1 | 1.07 | 1.05 | 1.05 | 1.05 | 1.10 | 1.10 | |
| Benchmarks | |||||||
| Current Ratio, Competitors2 | |||||||
| Accenture PLC | 1.25 | 1.40 | 1.40 | — | — | — | |
| Adobe Inc. | 1.25 | 1.48 | 0.79 | — | — | — | |
| Cadence Design Systems Inc. | 1.77 | 1.86 | — | — | — | — | |
| CrowdStrike Holdings Inc. | 2.65 | 2.38 | — | — | — | — | |
| Fair Isaac Corp. | 0.99 | 1.29 | 0.93 | — | — | — | |
| International Business Machines Corp. | 0.88 | 0.98 | — | — | — | — | |
| Intuit Inc. | 1.94 | 2.26 | 1.83 | — | — | — | |
| Microsoft Corp. | 2.08 | 2.52 | 2.53 | — | — | — | |
| Oracle Corp. | 2.30 | 3.03 | — | — | — | — | |
| Palantir Technologies Inc. | 4.34 | 3.74 | — | — | — | — | |
| Palo Alto Networks Inc. | 0.91 | 1.91 | 1.78 | — | — | — | |
| Salesforce Inc. | 1.23 | 1.08 | — | — | — | — | |
| ServiceNow Inc. | 1.05 | 1.21 | — | — | — | — | |
| Synopsys Inc. | 1.16 | 1.19 | 0.99 | — | — | — | |
| Workday Inc. | 1.12 | 1.04 | — | — | — | — | |
| Current Ratio, Sector | |||||||
| Software & Services | 1.67 | 1.91 | — | — | — | — | |
| Current Ratio, Industry | |||||||
| Information Technology | 1.55 | 1.71 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).
1 2021 Calculation
Current ratio = Current assets ÷ Current liabilities
= 40,741,800 ÷ 38,094,800 = 1.07
2 Click competitor name to see calculations.
- Current Assets
- The current assets exhibited considerable variability over the period analyzed. Starting at approximately 39.5 billion US dollars in mid-2016, the value declined to around 32.7 billion by mid-2017 and continued to slightly decrease to about 32 billion by mid-2018. A modest recovery was seen in mid-2019 with approximately 34.3 billion, followed by another decline to approximately 31.6 billion in mid-2020. A marked increase occurred in mid-2021, with current assets reaching roughly 40.7 billion, the highest point in the period under review.
- Current Liabilities
- Current liabilities demonstrated a generally fluctuating trend similar to current assets but with different timing and scale. Starting at about 35.8 billion US dollars in mid-2016, liabilities decreased to approximately 29.8 billion by mid-2017. The values rose slightly to approximately 30.4 billion in mid-2018 and further increased to about 32.6 billion in mid-2019. A decline followed in mid-2020 to around 30.1 billion, but this trend reversed sharply in mid-2021, with current liabilities climbing to the highest level in the period at about 38.1 billion.
- Current Ratio
- The current ratio remained relatively stable throughout the six-year span, hovering just above or slightly at 1.0. It started at 1.1 in 2016 and maintained this level into 2017. Thereafter, the ratio experienced a slight decrease to 1.05 in mid-2018, and this level was sustained through mid-2020. A minor improvement was observed in mid-2021, rising modestly to 1.07. This stability suggests a consistent balance between current assets and liabilities, despite the fluctuations in their absolute values.
- Overview and Insights
- The financial data indicates that both current assets and liabilities have undergone notable fluctuations, with both reaching peaks in the last recorded period. The current ratio stability in spite of these fluctuations suggests effective management of short-term liquidity and obligations. The sharp increase in current assets and liabilities in the final year may indicate shifts in working capital management, changes in operational scale, or other strategic financial decisions impacting liquidity. Overall, the company's ability to maintain a current ratio near 1.0 reflects a cautious approach to balancing short-term assets and liabilities, which is essential for maintaining operational liquidity.
Quick Ratio
Automatic Data Processing Inc., quick ratio calculation, comparison to benchmarks
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Cash and cash equivalents | 2,575,200) | 1,908,500) | 1,949,200) | 2,170,000) | 2,780,400) | 3,191,100) | |
| Accounts receivable, net of allowance for doubtful accounts | 2,727,400) | 2,441,300) | 2,439,300) | 1,984,200) | 1,703,600) | 1,742,800) | |
| Funds held for clients | 34,905,800) | 26,708,100) | 29,434,200) | 27,137,800) | 27,291,500) | 33,841,200) | |
| Total quick assets | 40,208,400) | 31,057,900) | 33,822,700) | 31,292,000) | 31,775,500) | 38,775,100) | |
| Current liabilities | 38,094,800) | 30,126,600) | 32,627,700) | 30,413,600) | 29,815,900) | 35,847,400) | |
| Liquidity Ratio | |||||||
| Quick ratio1 | 1.06 | 1.03 | 1.04 | 1.03 | 1.07 | 1.08 | |
| Benchmarks | |||||||
| Quick Ratio, Competitors2 | |||||||
| Accenture PLC | 1.14 | 1.29 | 1.29 | — | — | — | |
| Adobe Inc. | 1.11 | 1.34 | 0.70 | — | — | — | |
| Cadence Design Systems Inc. | 1.47 | 1.60 | — | — | — | — | |
| CrowdStrike Holdings Inc. | 2.50 | 2.18 | — | — | — | — | |
| Fair Isaac Corp. | 0.91 | 1.19 | 0.82 | — | — | — | |
| International Business Machines Corp. | 0.69 | 0.83 | — | — | — | — | |
| Intuit Inc. | 1.65 | 2.04 | 1.44 | — | — | — | |
| Microsoft Corp. | 1.90 | 2.33 | 2.35 | — | — | — | |
| Oracle Corp. | 2.15 | 2.83 | — | — | — | — | |
| Palantir Technologies Inc. | 4.11 | 3.59 | — | — | — | — | |
| Palo Alto Networks Inc. | 0.88 | 1.85 | 1.72 | — | — | — | |
| Salesforce Inc. | 1.11 | 0.95 | — | — | — | — | |
| ServiceNow Inc. | 1.01 | 1.16 | — | — | — | — | |
| Synopsys Inc. | 0.89 | 0.94 | 0.73 | — | — | — | |
| Workday Inc. | 1.07 | 0.95 | — | — | — | — | |
| Quick Ratio, Sector | |||||||
| Software & Services | 1.51 | 1.75 | — | — | — | — | |
| Quick Ratio, Industry | |||||||
| Information Technology | 1.30 | 1.46 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).
1 2021 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 40,208,400 ÷ 38,094,800 = 1.06
2 Click competitor name to see calculations.
- Total Quick Assets
- The total quick assets exhibited a fluctuating pattern over the examined periods. Starting at approximately 38.78 billion US dollars in mid-2016, the figure declined to about 31.78 billion by mid-2017 and continued a slight decrease to nearly 31.29 billion in mid-2018. A moderate recovery was noted in mid-2019, reaching 33.82 billion, followed by a decline to approximately 31.06 billion in mid-2020. The latest data point from mid-2021 indicated a significant increase, rising sharply to 40.21 billion, the highest value in the series.
- Current Liabilities
- Current liabilities also showed variability but with less pronounced fluctuations compared to total quick assets. Beginning at roughly 35.85 billion US dollars in mid-2016, liabilities decreased to around 29.82 billion by mid-2017, then slightly increased to approximately 30.41 billion in mid-2018. A further rise was observed in mid-2019, with liabilities reaching 32.63 billion, followed by a decrease to 30.13 billion in mid-2020. The latest figure, recorded in mid-2021, increased substantially to 38.09 billion, representing the highest level over the observed period.
- Quick Ratio
- The quick ratio demonstrated relative stability throughout the timeframe, fluctuating narrowly between 1.03 and 1.08. Initially, at 1.08 in mid-2016, it slightly decreased to 1.07 in mid-2017 and gradually moved downward to its lowest recorded value of 1.03 in mid-2018 and mid-2020. Small increases were noted in mid-2019 (1.04) and mid-2021 (1.06), with the latter indicating a marginal improvement in the company's short-term liquidity position relative to earlier years.
- Overall Analysis
- The data reflects a generally consistent liquidity profile, with quick assets and current liabilities rising and falling in similar patterns, maintaining the quick ratio near a stable benchmark slightly above 1. The notable increases in both quick assets and current liabilities in mid-2021 suggest a scaling of operations or balance sheet expansion. The quick ratio's steadiness despite these changes implies balanced management of liquid assets and obligations. The stability of the quick ratio indicates that the company's ability to meet short-term liabilities with liquid assets remained sound over the six-year period.
Cash Ratio
Automatic Data Processing Inc., cash ratio calculation, comparison to benchmarks
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Cash and cash equivalents | 2,575,200) | 1,908,500) | 1,949,200) | 2,170,000) | 2,780,400) | 3,191,100) | |
| Funds held for clients | 34,905,800) | 26,708,100) | 29,434,200) | 27,137,800) | 27,291,500) | 33,841,200) | |
| Total cash assets | 37,481,000) | 28,616,600) | 31,383,400) | 29,307,800) | 30,071,900) | 37,032,300) | |
| Current liabilities | 38,094,800) | 30,126,600) | 32,627,700) | 30,413,600) | 29,815,900) | 35,847,400) | |
| Liquidity Ratio | |||||||
| Cash ratio1 | 0.98 | 0.95 | 0.96 | 0.96 | 1.01 | 1.03 | |
| Benchmarks | |||||||
| Cash Ratio, Competitors2 | |||||||
| Accenture PLC | 0.52 | 0.67 | 0.55 | — | — | — | |
| Adobe Inc. | 0.84 | 1.09 | 0.51 | — | — | — | |
| Cadence Design Systems Inc. | 1.13 | 1.17 | — | — | — | — | |
| CrowdStrike Holdings Inc. | 2.22 | 1.85 | — | — | — | — | |
| Fair Isaac Corp. | 0.35 | 0.38 | 0.22 | — | — | — | |
| International Business Machines Corp. | 0.22 | 0.36 | — | — | — | — | |
| Intuit Inc. | 1.46 | 2.00 | 1.39 | — | — | — | |
| Microsoft Corp. | 1.47 | 1.89 | 1.93 | — | — | — | |
| Oracle Corp. | 1.93 | 2.50 | — | — | — | — | |
| Palantir Technologies Inc. | 3.83 | 3.33 | — | — | — | — | |
| Palo Alto Networks Inc. | 0.57 | 1.39 | 1.37 | — | — | — | |
| Salesforce Inc. | 0.67 | 0.54 | — | — | — | — | |
| ServiceNow Inc. | 0.67 | 0.83 | — | — | — | — | |
| Synopsys Inc. | 0.65 | 0.58 | 0.42 | — | — | — | |
| Workday Inc. | 0.83 | 0.65 | — | — | — | — | |
| Cash Ratio, Sector | |||||||
| Software & Services | 1.11 | 1.32 | — | — | — | — | |
| Cash Ratio, Industry | |||||||
| Information Technology | 0.88 | 1.06 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).
1 2021 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 37,481,000 ÷ 38,094,800 = 0.98
2 Click competitor name to see calculations.
- Total cash assets
- The total cash assets exhibited fluctuations throughout the period analyzed. Starting from approximately 37 billion USD in mid-2016, the cash assets declined to around 30 billion USD in mid-2017 and continued to decrease slightly to nearly 29.3 billion USD by mid-2018. A modest recovery occurred in mid-2019, raising cash assets to approximately 31.4 billion USD, followed by a decrease to about 28.6 billion USD in mid-2020. By mid-2021, cash assets showed a notable increase, reaching roughly 37.5 billion USD, the highest in the observed timeframe.
- Current liabilities
- Current liabilities also experienced variability over the years. Beginning at approximately 35.8 billion USD in mid-2016, liabilities decreased to roughly 29.8 billion USD by mid-2017. However, a rising trend followed, with current liabilities increasing to about 30.4 billion USD in mid-2018 and further to approximately 32.6 billion USD in mid-2019. Mid-2020 saw a decline to nearly 30.1 billion USD, but liabilities surged again significantly by mid-2021 to around 38.1 billion USD, the highest level within the period.
- Cash ratio
- The cash ratio, which measures the liquidity position by comparing cash assets to current liabilities, started at 1.03 in mid-2016, indicating slightly more cash assets than current liabilities. This ratio declined to 1.01 in mid-2017 and further dropped below 1.0 from mid-2018 through mid-2020, reaching as low as 0.95. This suggests that, during these years, cash assets were insufficient to cover current liabilities entirely. A marginal improvement was observed in mid-2021, with the ratio increasing to 0.98, though it remained below the initial levels and still under 1.0.
- Overall analysis
- Both total cash assets and current liabilities displayed a pattern of decline followed by recovery and increased volatility, particularly in the latest year observed. Despite the fluctuations, current liabilities ended higher than at the start, while cash assets recovered to their initial peak after a dip. The cash ratio decreased over the years, signaling reduced liquidity strength, though a slight rebound appeared at the period's end. The trends suggest managed liquidity challenges with increased liabilities and fluctuating cash reserves, highlighting the importance of monitoring short-term financial stability closely.