Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Automatic Data Processing Inc., solvency 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).
The solvency profile demonstrates a conservative approach to long-term financing, characterized by low debt-to-asset ratios and consistently high coverage capacities across the observed period.
- Leverage and Capital Structure
- Debt to equity and debt to capital ratios exhibit a cyclical pattern. Leverage increased between 2016 and 2018, peaked at a debt to equity ratio of 0.58, and subsequently declined to a low of 0.35 by 2020. A resurgence was noted in 2021, with the debt to equity ratio rising to 0.53. The inclusion of operating lease liabilities consistently elevates these figures, reaching a peak of 0.61 for debt to equity in 2021, suggesting that lease obligations represent a growing component of the company's total liabilities.
- Asset-Based Solvency
- The debt to assets ratio remains remarkably stable and low, holding at 0.05 from 2016 through 2019. A marginal increase to 0.06 was recorded in 2021. When operating lease liabilities are included, the ratio rises slightly to 0.07 in 2021, indicating that the company maintains a minimal reliance on debt to finance its asset base.
- Financial Leverage
- Financial leverage showed significant variance, peaking at 10.72 in 2018 before contracting to 6.81 in 2020. This contraction suggests a reduction in the use of debt to amplify equity returns during that period, followed by a recovery to 8.60 in 2021.
- Debt Service Capacity
- Coverage ratios indicate a robust ability to service financial obligations. The interest coverage ratio experienced a decline from 40.76 in 2016 to 22.14 in 2018, but rebounded strongly to reach 57.30 by 2021. Parallel to this, the fixed charge coverage ratio demonstrated a general upward trajectory, increasing from 7.82 in 2016 to 15.85 in 2021, reflecting an enhanced margin of safety in meeting fixed contractual obligations.
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Debt to Equity
Automatic Data Processing Inc., debt to equity 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) | |||||||
| Obligations under reverse repurchase agreements | 23,500) | 13,600) | 262,000) | —) | —) | —) | |
| Short-term debt | —) | 1,001,800) | —) | —) | —) | —) | |
| Long-term debt | 2,985,000) | 1,002,800) | 2,002,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Total debt | 3,008,500) | 2,018,200) | 2,264,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Stockholders’ equity | 5,670,100) | 5,752,200) | 5,399,900) | 3,459,600) | 3,977,000) | 4,481,600) | |
| Solvency Ratio | |||||||
| Debt to equity1 | 0.53 | 0.35 | 0.42 | 0.58 | 0.50 | 0.45 | |
| Benchmarks | |||||||
| Debt to Equity, Competitors2 | |||||||
| Accenture PLC | 0.00 | 0.00 | — | — | — | — | |
| Adobe Inc. | 0.28 | 0.31 | — | — | — | — | |
| AppLovin Corp. | 1.53 | — | — | — | — | — | |
| Cadence Design Systems Inc. | 0.13 | — | — | — | — | — | |
| Datadog Inc. | 0.71 | — | — | — | — | — | |
| International Business Machines Corp. | 2.74 | — | — | — | — | — | |
| Intuit Inc. | 0.21 | — | — | — | — | — | |
| Microsoft Corp. | 0.50 | — | — | — | — | — | |
| Oracle Corp. | 16.08 | — | — | — | — | — | |
| Palantir Technologies Inc. | 0.00 | — | — | — | — | — | |
| Palo Alto Networks Inc. | 5.08 | — | — | — | — | — | |
| Salesforce Inc. | 0.07 | — | — | — | — | — | |
| ServiceNow Inc. | 0.43 | — | — | — | — | — | |
| Synopsys Inc. | 0.02 | 0.03 | — | — | — | — | |
| Workday Inc. | 0.55 | — | — | — | — | — | |
| Debt to Equity, Sector | |||||||
| Software & Services | 0.83 | — | — | — | — | — | |
| Debt to Equity, Industry | |||||||
| Information Technology | 0.83 | — | — | — | — | — | |
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
Debt to equity = Total debt ÷ Stockholders’ equity
= 3,008,500 ÷ 5,670,100 = 0.53
2 Click competitor name to see calculations.
An analysis of the solvency metrics between June 30, 2016, and June 30, 2021, reveals a fluctuating debt-to-equity profile characterized by a period of increasing leverage followed by a significant deleveraging phase and a subsequent spike in total liabilities in the final year.
- Total Debt Trends
- Total debt remained relatively stable between 2016 and 2018, holding near 2 billion US dollars. A moderate increase occurred in 2019, followed by a reduction in 2020. However, a substantial increase is observed in 2021, where total debt rose to 3.008 billion US dollars, representing a approximately 49% increase compared to the previous year.
- Stockholders’ Equity Trends
- A downward trend in equity was observed from 2016 to 2018, with values declining from 4.48 billion to 3.46 billion US dollars. This was followed by a sharp recovery in 2019, where equity surged to 5.40 billion US dollars. The equity position remained relatively stable through 2020 and 2021, ending the period at 5.67 billion US dollars.
- Debt to Equity Ratio Analysis
- The debt to equity ratio exhibited significant volatility. An initial upward trend from 0.45 in 2016 to a peak of 0.58 in 2018 was primarily driven by the contraction of stockholders' equity. A subsequent sharp decline occurred between 2019 and 2020, reaching a period low of 0.35, coinciding with the rapid expansion of the equity base. The ratio increased again to 0.53 by June 30, 2021, driven by the significant increase in total debt during that fiscal year.
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Debt to Equity (including Operating Lease Liability)
Automatic Data Processing Inc., debt to equity (including operating lease liability) 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) | |||||||
| Obligations under reverse repurchase agreements | 23,500) | 13,600) | 262,000) | —) | —) | —) | |
| Short-term debt | —) | 1,001,800) | —) | —) | —) | —) | |
| Long-term debt | 2,985,000) | 1,002,800) | 2,002,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Total debt | 3,008,500) | 2,018,200) | 2,264,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Current operating lease liability (recorded within Accrued expenses and other current liabilities) | 94,700) | 95,500) | —) | —) | —) | —) | |
| Long-term operating lease liabilities | 343,200) | 344,400) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 3,446,400) | 2,458,100) | 2,264,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Stockholders’ equity | 5,670,100) | 5,752,200) | 5,399,900) | 3,459,600) | 3,977,000) | 4,481,600) | |
| Solvency Ratio | |||||||
| Debt to equity (including operating lease liability)1 | 0.61 | 0.43 | 0.42 | 0.58 | 0.50 | 0.45 | |
| Benchmarks | |||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | |||||||
| Accenture PLC | 0.18 | 0.21 | — | — | — | — | |
| Adobe Inc. | 0.32 | 0.35 | — | — | — | — | |
| AppLovin Corp. | 1.57 | — | — | — | — | — | |
| Cadence Design Systems Inc. | 0.18 | — | — | — | — | — | |
| Datadog Inc. | 0.78 | — | — | — | — | — | |
| International Business Machines Corp. | 2.92 | — | — | — | — | — | |
| Intuit Inc. | 0.25 | — | — | — | — | — | |
| Microsoft Corp. | 0.58 | — | — | — | — | — | |
| Oracle Corp. | 16.61 | — | — | — | — | — | |
| Palantir Technologies Inc. | 0.11 | — | — | — | — | — | |
| Palo Alto Networks Inc. | 5.68 | — | — | — | — | — | |
| Salesforce Inc. | 0.15 | — | — | — | — | — | |
| ServiceNow Inc. | 0.60 | — | — | — | — | — | |
| Synopsys Inc. | 0.13 | 0.14 | — | — | — | — | |
| Workday Inc. | 0.68 | — | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | |||||||
| Software & Services | 0.93 | — | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | |||||||
| Information Technology | 0.90 | — | — | — | — | — | |
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
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Stockholders’ equity
= 3,446,400 ÷ 5,670,100 = 0.61
2 Click competitor name to see calculations.
The solvency profile from June 30, 2016, to June 30, 2021, exhibits a period of volatility in leverage, characterized by a significant increase in total debt toward the end of the term and fluctuating equity levels.
- Total Debt Trends
- Total debt, including operating lease liabilities, remained relatively stagnant between 2016 and 2018, holding near 2 billion US dollars. A steady upward trajectory began in 2019, culminating in a sharp increase to 3.45 billion US dollars by June 30, 2021. The most substantial growth occurred between 2020 and 2021, representing an increase of approximately 40% in a single year.
- Stockholders' Equity Fluctuations
- Equity levels experienced a notable decline during the first three years of the period, falling from 4.48 billion US dollars in 2016 to a low of 3.46 billion US dollars in 2018. This was followed by a substantial recovery in 2019, where equity rose to 5.40 billion US dollars, subsequently stabilizing around 5.67 billion US dollars by 2021.
- Debt to Equity Ratio Analysis
- The debt to equity ratio reflects the combined impact of the aforementioned trends. An initial upward trend is observed from 2016 to 2018, where the ratio rose from 0.45 to 0.58, driven primarily by the contraction of stockholders' equity. A significant correction occurred in 2019, with the ratio dropping to 0.42 due to the sharp increase in equity. However, the ratio reached its peak of 0.61 in 2021, as the rapid acceleration of total debt outpaced the relatively stable equity base.
Overall, while the solvency position remained moderate for much of the period, the sharp rise in the debt to equity ratio in 2021 indicates a shift toward higher financial leverage.
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Debt to Capital
Automatic Data Processing Inc., debt to capital 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) | |||||||
| Obligations under reverse repurchase agreements | 23,500) | 13,600) | 262,000) | —) | —) | —) | |
| Short-term debt | —) | 1,001,800) | —) | —) | —) | —) | |
| Long-term debt | 2,985,000) | 1,002,800) | 2,002,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Total debt | 3,008,500) | 2,018,200) | 2,264,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Stockholders’ equity | 5,670,100) | 5,752,200) | 5,399,900) | 3,459,600) | 3,977,000) | 4,481,600) | |
| Total capital | 8,678,600) | 7,770,400) | 7,664,100) | 5,462,000) | 5,979,400) | 6,489,300) | |
| Solvency Ratio | |||||||
| Debt to capital1 | 0.35 | 0.26 | 0.30 | 0.37 | 0.33 | 0.31 | |
| Benchmarks | |||||||
| Debt to Capital, Competitors2 | |||||||
| Accenture PLC | 0.00 | 0.00 | — | — | — | — | |
| Adobe Inc. | 0.22 | 0.24 | — | — | — | — | |
| AppLovin Corp. | 0.60 | — | — | — | — | — | |
| Cadence Design Systems Inc. | 0.11 | — | — | — | — | — | |
| Datadog Inc. | 0.41 | — | — | — | — | — | |
| International Business Machines Corp. | 0.73 | — | — | — | — | — | |
| Intuit Inc. | 0.17 | — | — | — | — | — | |
| Microsoft Corp. | 0.33 | — | — | — | — | — | |
| Oracle Corp. | 0.94 | — | — | — | — | — | |
| Palantir Technologies Inc. | 0.00 | — | — | — | — | — | |
| Palo Alto Networks Inc. | 0.84 | — | — | — | — | — | |
| Salesforce Inc. | 0.06 | — | — | — | — | — | |
| ServiceNow Inc. | 0.30 | — | — | — | — | — | |
| Synopsys Inc. | 0.02 | 0.03 | — | — | — | — | |
| Workday Inc. | 0.35 | — | — | — | — | — | |
| Debt to Capital, Sector | |||||||
| Software & Services | 0.45 | — | — | — | — | — | |
| Debt to Capital, Industry | |||||||
| Information Technology | 0.45 | — | — | — | — | — | |
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
Debt to capital = Total debt ÷ Total capital
= 3,008,500 ÷ 8,678,600 = 0.35
2 Click competitor name to see calculations.
The financial position of the entity between June 30, 2016, and June 30, 2021, is characterized by fluctuations in capital structure and a notable increase in leverage toward the end of the period. The debt to capital ratio exhibits a non-linear trend, reflecting varying strategies in debt management and capital accumulation.
- Total Debt Analysis
- Total debt remained relatively stable between 2016 and 2018, holding near 2 billion US dollars. A moderate increase occurred in 2019, followed by a correction in 2020. However, a significant escalation is observed in 2021, where total debt rose to 3,008,500 thousand US dollars, representing a substantial increase in nominal liabilities compared to the preceding five years.
- Total Capital Trends
- Total capital experienced a period of contraction from 2016 to 2018, reaching a low of 5,462,000 thousand US dollars. This was followed by a sharp expansion in 2019, with capital increasing to 7,664,100 thousand US dollars. The upward trajectory continued through 2021, concluding at 8,678,600 thousand US dollars, indicating a general growth in the total capital base despite the early decline.
- Debt to Capital Ratio Interpretation
- The debt to capital ratio fluctuated between a high of 0.37 in 2018 and a low of 0.26 in 2020. The peak in 2018 was driven by a reduction in total capital while debt levels remained constant. Conversely, the decline to 0.26 in 2020 was the result of significant capital growth outpacing debt obligations. The ratio increased again to 0.35 in 2021, reflecting the impact of the surge in total debt, which offset the concurrent increase in total capital.
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Debt to Capital (including Operating Lease Liability)
Automatic Data Processing Inc., debt to capital (including operating lease liability) 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) | |||||||
| Obligations under reverse repurchase agreements | 23,500) | 13,600) | 262,000) | —) | —) | —) | |
| Short-term debt | —) | 1,001,800) | —) | —) | —) | —) | |
| Long-term debt | 2,985,000) | 1,002,800) | 2,002,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Total debt | 3,008,500) | 2,018,200) | 2,264,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Current operating lease liability (recorded within Accrued expenses and other current liabilities) | 94,700) | 95,500) | —) | —) | —) | —) | |
| Long-term operating lease liabilities | 343,200) | 344,400) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 3,446,400) | 2,458,100) | 2,264,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Stockholders’ equity | 5,670,100) | 5,752,200) | 5,399,900) | 3,459,600) | 3,977,000) | 4,481,600) | |
| Total capital (including operating lease liability) | 9,116,500) | 8,210,300) | 7,664,100) | 5,462,000) | 5,979,400) | 6,489,300) | |
| Solvency Ratio | |||||||
| Debt to capital (including operating lease liability)1 | 0.38 | 0.30 | 0.30 | 0.37 | 0.33 | 0.31 | |
| Benchmarks | |||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | |||||||
| Accenture PLC | 0.15 | 0.17 | — | — | — | — | |
| Adobe Inc. | 0.24 | 0.26 | — | — | — | — | |
| AppLovin Corp. | 0.61 | — | — | — | — | — | |
| Cadence Design Systems Inc. | 0.15 | — | — | — | — | — | |
| Datadog Inc. | 0.44 | — | — | — | — | — | |
| International Business Machines Corp. | 0.74 | — | — | — | — | — | |
| Intuit Inc. | 0.20 | — | — | — | — | — | |
| Microsoft Corp. | 0.37 | — | — | — | — | — | |
| Oracle Corp. | 0.94 | — | — | — | — | — | |
| Palantir Technologies Inc. | 0.10 | — | — | — | — | — | |
| Palo Alto Networks Inc. | 0.85 | — | — | — | — | — | |
| Salesforce Inc. | 0.13 | — | — | — | — | — | |
| ServiceNow Inc. | 0.37 | — | — | — | — | — | |
| Synopsys Inc. | 0.11 | 0.12 | — | — | — | — | |
| Workday Inc. | 0.41 | — | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | |||||||
| Software & Services | 0.48 | — | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | |||||||
| Information Technology | 0.47 | — | — | — | — | — | |
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
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 3,446,400 ÷ 9,116,500 = 0.38
2 Click competitor name to see calculations.
The solvency profile exhibits a period of relative stability followed by a marked increase in leverage toward the end of the observed period. While both total capital and debt levels experienced fluctuations, the debt to capital ratio remained within a defined range, ultimately reaching its highest point in 2021.
- Total Debt Trends
- Total debt, including operating lease liabilities, remained nearly stagnant between 2016 and 2018 at approximately 2 billion US dollars. A growth phase commenced in 2019, with debt rising to 2.26 billion US dollars and continuing upward to 2.46 billion US dollars by 2020. A substantial acceleration occurred in 2021, with total debt ascending to 3.45 billion US dollars, indicating a significant expansion of the company's liabilities.
- Total Capital Movement
- Total capital experienced a steady contraction from 2016 to 2018, declining from 6.49 billion US dollars to 5.46 billion US dollars. This trend reversed sharply in 2019, as capital increased to 7.66 billion US dollars. This growth trajectory continued through 2021, where total capital reached 9.12 billion US dollars, suggesting a significant expansion of the overall capital base.
- Debt to Capital Ratio Analysis
- The debt to capital ratio demonstrates a non-linear trend. An initial increase is observed from 0.31 in 2016 to 0.37 in 2018, which was primarily driven by the contraction of total capital. The ratio subsequently decreased and stabilized at 0.30 during 2019 and 2020, reflecting a period where the growth in total capital outpaced the growth in debt. However, by 2021, the ratio rose to 0.38, the highest level in the analyzed period, confirming that the most recent increase in total debt exceeded the proportionate increase in total capital.
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Debt to Assets
Automatic Data Processing Inc., debt to assets 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) | |||||||
| Obligations under reverse repurchase agreements | 23,500) | 13,600) | 262,000) | —) | —) | —) | |
| Short-term debt | —) | 1,001,800) | —) | —) | —) | —) | |
| Long-term debt | 2,985,000) | 1,002,800) | 2,002,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Total debt | 3,008,500) | 2,018,200) | 2,264,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Total assets | 48,772,500) | 39,165,500) | 41,887,700) | 37,088,700) | 37,180,000) | 43,670,000) | |
| Solvency Ratio | |||||||
| Debt to assets1 | 0.06 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | |
| Benchmarks | |||||||
| Debt to Assets, Competitors2 | |||||||
| Accenture PLC | 0.00 | 0.00 | — | — | — | — | |
| Adobe Inc. | 0.15 | 0.17 | — | — | — | — | |
| AppLovin Corp. | 0.53 | — | — | — | — | — | |
| Cadence Design Systems Inc. | 0.08 | — | — | — | — | — | |
| Datadog Inc. | 0.31 | — | — | — | — | — | |
| International Business Machines Corp. | 0.39 | — | — | — | — | — | |
| Intuit Inc. | 0.13 | — | — | — | — | — | |
| Microsoft Corp. | 0.21 | — | — | — | — | — | |
| Oracle Corp. | 0.64 | — | — | — | — | — | |
| Palantir Technologies Inc. | 0.00 | — | — | — | — | — | |
| Palo Alto Networks Inc. | 0.31 | — | — | — | — | — | |
| Salesforce Inc. | 0.04 | — | — | — | — | — | |
| ServiceNow Inc. | 0.15 | — | — | — | — | — | |
| Synopsys Inc. | 0.01 | 0.02 | — | — | — | — | |
| Workday Inc. | 0.21 | — | — | — | — | — | |
| Debt to Assets, Sector | |||||||
| Software & Services | 0.28 | — | — | — | — | — | |
| Debt to Assets, Industry | |||||||
| Information Technology | 0.29 | — | — | — | — | — | |
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
Debt to assets = Total debt ÷ Total assets
= 3,008,500 ÷ 48,772,500 = 0.06
2 Click competitor name to see calculations.
The solvency profile remains exceptionally strong, characterized by a low reliance on borrowed funds relative to the total asset base. Throughout the observed six-year period, a highly conservative leverage position was maintained, indicating a low risk of insolvency and a robust financial cushion.
- Debt to Assets Ratio Trend
- The ratio remained constant at 0.05 from 2016 through 2020, exhibiting remarkable stability. A marginal increase to 0.06 was recorded in 2021. This consistency suggests a disciplined approach to debt management and a deliberate strategy to keep leverage levels minimal.
- Total Debt Fluctuations
- Debt levels were stable between 2016 and 2018, followed by a moderate increase in 2019 to US$ 2,264,200 thousand. After a slight reduction in 2020, a significant increase occurred in 2021, with total debt rising to US$ 3,008,500 thousand, representing the highest level of borrowing within the analyzed timeframe.
- Asset Base Volatility
- Total assets experienced notable fluctuations, declining from US$ 43,670,000 thousand in 2016 to a low of US$ 37,088,700 thousand in 2018. Following a recovery in 2019 and a subsequent dip in 2020, assets reached a period peak of US$ 48,772,500 thousand in 2021.
The concurrent rise in both total debt and total assets in 2021 explains why the debt-to-assets ratio shifted by only one percentage point despite the substantial increase in nominal debt. The expansion of the asset base effectively offset the increase in liabilities, preserving the overall solvency position of the organization.
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Debt to Assets (including Operating Lease Liability)
Automatic Data Processing Inc., debt to assets (including operating lease liability) 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) | |||||||
| Obligations under reverse repurchase agreements | 23,500) | 13,600) | 262,000) | —) | —) | —) | |
| Short-term debt | —) | 1,001,800) | —) | —) | —) | —) | |
| Long-term debt | 2,985,000) | 1,002,800) | 2,002,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Total debt | 3,008,500) | 2,018,200) | 2,264,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Current operating lease liability (recorded within Accrued expenses and other current liabilities) | 94,700) | 95,500) | —) | —) | —) | —) | |
| Long-term operating lease liabilities | 343,200) | 344,400) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 3,446,400) | 2,458,100) | 2,264,200) | 2,002,400) | 2,002,400) | 2,007,700) | |
| Total assets | 48,772,500) | 39,165,500) | 41,887,700) | 37,088,700) | 37,180,000) | 43,670,000) | |
| Solvency Ratio | |||||||
| Debt to assets (including operating lease liability)1 | 0.07 | 0.06 | 0.05 | 0.05 | 0.05 | 0.05 | |
| Benchmarks | |||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | |||||||
| Accenture PLC | 0.08 | 0.09 | — | — | — | — | |
| Adobe Inc. | 0.17 | 0.19 | — | — | — | — | |
| AppLovin Corp. | 0.54 | — | — | — | — | — | |
| Cadence Design Systems Inc. | 0.11 | — | — | — | — | — | |
| Datadog Inc. | 0.34 | — | — | — | — | — | |
| International Business Machines Corp. | 0.42 | — | — | — | — | — | |
| Intuit Inc. | 0.16 | — | — | — | — | — | |
| Microsoft Corp. | 0.25 | — | — | — | — | — | |
| Oracle Corp. | 0.66 | — | — | — | — | — | |
| Palantir Technologies Inc. | 0.08 | — | — | — | — | — | |
| Palo Alto Networks Inc. | 0.35 | — | — | — | — | — | |
| Salesforce Inc. | 0.10 | — | — | — | — | — | |
| ServiceNow Inc. | 0.21 | — | — | — | — | — | |
| Synopsys Inc. | 0.08 | 0.08 | — | — | — | — | |
| Workday Inc. | 0.26 | — | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | |||||||
| Software & Services | 0.32 | — | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | |||||||
| Information Technology | 0.31 | — | — | — | — | — | |
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
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 3,446,400 ÷ 48,772,500 = 0.07
2 Click competitor name to see calculations.
An analysis of the solvency position from 2016 to 2021 reveals a consistently low leverage profile, characterized by a gradual increase in the debt-to-assets ratio toward the end of the period. While the absolute value of debt expanded, the capital structure remained conservative relative to the total asset base.
- Total Debt Trends
- Debt obligations, including operating lease liabilities, remained nearly stagnant between 2016 and 2018, hovering around 2 billion US dollars. A period of expansion followed, with debt increasing to 2.26 billion US dollars in 2019 and accelerating significantly to 3.45 billion US dollars by June 30, 2021.
- Asset Base Fluctuations
- Total assets experienced a contraction from 43.67 billion US dollars in 2016 to a low of 37.09 billion US dollars in 2018. This downward trend reversed in 2019, with assets growing steadily to reach 48.77 billion US dollars by the end of the observed period.
- Debt-to-Assets Ratio Interpretation
- The debt-to-assets ratio exhibited remarkable stability at 0.05 from 2016 through 2019. A slight upward trajectory is observed in the final two years, with the ratio rising to 0.06 in 2020 and 0.07 in 2021. This increase indicates that debt growth outpaced asset growth during this specific interval, although the overall ratio remains low, suggesting strong solvency and minimal reliance on borrowed funds to finance assets.
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Financial Leverage
Automatic Data Processing Inc., financial leverage 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) | |||||||
| Total assets | 48,772,500) | 39,165,500) | 41,887,700) | 37,088,700) | 37,180,000) | 43,670,000) | |
| Stockholders’ equity | 5,670,100) | 5,752,200) | 5,399,900) | 3,459,600) | 3,977,000) | 4,481,600) | |
| Solvency Ratio | |||||||
| Financial leverage1 | 8.60 | 6.81 | 7.76 | 10.72 | 9.35 | 9.74 | |
| Benchmarks | |||||||
| Financial Leverage, Competitors2 | |||||||
| Accenture PLC | 2.21 | 2.18 | — | — | — | — | |
| Adobe Inc. | 1.84 | 1.83 | — | — | — | — | |
| AppLovin Corp. | 2.88 | — | — | — | — | — | |
| Cadence Design Systems Inc. | 1.60 | — | — | — | — | — | |
| Datadog Inc. | 2.29 | — | — | — | — | — | |
| International Business Machines Corp. | 6.98 | — | — | — | — | — | |
| Intuit Inc. | 1.57 | — | — | — | — | — | |
| Microsoft Corp. | 2.35 | — | — | — | — | — | |
| Oracle Corp. | 25.03 | — | — | — | — | — | |
| Palantir Technologies Inc. | 1.42 | — | — | — | — | — | |
| Palo Alto Networks Inc. | 16.14 | — | — | — | — | — | |
| Salesforce Inc. | 1.60 | — | — | — | — | — | |
| ServiceNow Inc. | 2.92 | — | — | — | — | — | |
| Synopsys Inc. | 1.65 | 1.64 | — | — | — | — | |
| Workday Inc. | 2.66 | — | — | — | — | — | |
| Financial Leverage, Sector | |||||||
| Software & Services | 2.95 | — | — | — | — | — | |
| Financial Leverage, Industry | |||||||
| Information Technology | 2.87 | — | — | — | — | — | |
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
Financial leverage = Total assets ÷ Stockholders’ equity
= 48,772,500 ÷ 5,670,100 = 8.60
2 Click competitor name to see calculations.
An analysis of the solvency position reveals a volatile trend in financial leverage between 2016 and 2021. The financial leverage ratio experienced a peak in 2018 before undergoing a significant correction and subsequent increase in 2021, indicating fluctuations in the company's capital structure and asset financing strategy.
- Total Asset Fluctuations
- Total assets demonstrated a non-linear trajectory, starting at 43.67 billion US dollars in 2016 and declining to approximately 37.09 billion US dollars by 2018. A recovery phase followed, with assets increasing to 41.89 billion US dollars in 2019, followed by a slight dip in 2020, and culminating in a significant expansion to 48.77 billion US dollars by June 30, 2021.
- Stockholders' Equity Trends
- Equity levels showed a downward trend in the early part of the period, decreasing from 4.48 billion US dollars in 2016 to a low of 3.46 billion US dollars in 2018. This was followed by a sharp increase in 2019 to 5.40 billion US dollars, remaining relatively stable through 2021 at 5.67 billion US dollars. The increase in equity starting in 2019 acted as a primary driver for the reduction in financial leverage during that interval.
- Financial Leverage Ratio Analysis
- The financial leverage ratio moved from 9.74 in 2016 to a peak of 10.72 in 2018, reflecting an increase in the proportion of debt relative to equity. A period of significant deleveraging occurred between 2019 and 2020, where the ratio dropped to a low of 6.81, coinciding with the surge in stockholders' equity. However, by June 30, 2021, the ratio rose to 8.60, driven primarily by the substantial increase in total assets while equity remained nearly stagnant.
The overall pattern suggests that the company's solvency profile is highly sensitive to changes in equity levels and asset acquisitions. The sharp decline in leverage between 2018 and 2020 indicates a strengthening of the equity base, while the rebound in 2021 suggests a shift back toward asset-funded growth.
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Interest Coverage
Automatic Data Processing Inc., interest coverage 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) | |||||||
| Net earnings | 2,598,500) | 2,466,500) | 2,292,800) | 1,620,800) | 1,733,400) | 1,492,500) | |
| Less: Net loss from discontinued operations | —) | —) | —) | —) | —) | (900) | |
| Add: Income tax expense | 762,700) | 716,100) | 712,800) | 550,300) | 797,700) | 741,300) | |
| Add: Interest expense | 59,700) | 107,100) | 129,900) | 102,700) | 80,000) | 56,200) | |
| Earnings before interest and tax (EBIT) | 3,420,900) | 3,289,700) | 3,135,500) | 2,273,800) | 2,611,100) | 2,290,900) | |
| Solvency Ratio | |||||||
| Interest coverage1 | 57.30 | 30.72 | 24.14 | 22.14 | 32.64 | 40.76 | |
| Benchmarks | |||||||
| Interest Coverage, Competitors2 | |||||||
| Accenture PLC | 131.46 | 205.84 | — | — | — | — | |
| Adobe Inc. | 51.49 | 37.00 | — | — | — | — | |
| AppLovin Corp. | 1.45 | — | — | — | — | — | |
| Cadence Design Systems Inc. | 46.26 | — | — | — | — | — | |
| Datadog Inc. | 0.12 | — | — | — | — | — | |
| International Business Machines Corp. | 5.20 | — | — | — | — | — | |
| Intuit Inc. | 89.14 | — | — | — | — | — | |
| Microsoft Corp. | 31.31 | — | — | — | — | — | |
| Oracle Corp. | 6.28 | — | — | — | — | — | |
| Palantir Technologies Inc. | -133.20 | — | — | — | — | — | |
| Palo Alto Networks Inc. | -1.85 | — | — | — | — | — | |
| Salesforce Inc. | 21.49 | — | — | — | — | — | |
| ServiceNow Inc. | 9.89 | — | — | — | — | — | |
| Synopsys Inc. | 240.38 | 125.16 | — | — | — | — | |
| Workday Inc. | -3.00 | — | — | — | — | — | |
| Interest Coverage, Sector | |||||||
| Software & Services | 17.09 | — | — | — | — | — | |
| Interest Coverage, Industry | |||||||
| Information Technology | 19.66 | — | — | — | — | — | |
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
Interest coverage = EBIT ÷ Interest expense
= 3,420,900 ÷ 59,700 = 57.30
2 Click competitor name to see calculations.
The solvency profile of the organization between June 30, 2016, and June 30, 2021, is characterized by a strong ability to service interest obligations, despite a period of moderate volatility in the mid-term. The interest coverage ratio exhibited a U-shaped trajectory, reaching a trough in 2018 before expanding to its highest level in 2021.
- Earnings Before Interest and Tax (EBIT) Trends
- Operational profitability showed a general upward trajectory over the six-year period. After an initial increase in 2017, EBIT experienced a temporary contraction in 2018 to 2,273,800 thousand US$. However, a sustained recovery followed, with earnings growing consistently from 2019 through 2021, culminating in a peak of 3,420,900 thousand US$.
- Interest Expense Dynamics
- Interest expenses grew steadily from 56,200 thousand US$ in 2016 to a peak of 129,900 thousand US$ in 2019. Following this peak, a significant downward trend occurred, with expenses decreasing to 107,100 thousand US$ in 2020 and further dropping to 59,700 thousand US$ by June 30, 2021, effectively returning to 2016 levels.
- Interest Coverage Ratio Analysis
- The interest coverage ratio declined from 40.76 in 2016 to a low of 22.14 in 2018, driven by the simultaneous occurrence of lower EBIT and rising interest costs. A strong reversal followed this period; the ratio improved to 30.72 in 2020 and surged to 57.30 in 2021. This final increase was the result of the dual impact of expanding operational earnings and a substantial reduction in interest obligations.
Overall, the data indicates a robust solvency position. Even at its lowest point in 2018, the organization maintained a coverage ratio well above critical thresholds, ensuring that earnings were more than sufficient to cover interest payments. The significant expansion of the ratio by 2021 reflects an enhanced margin of safety and increased financial flexibility.
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Fixed Charge Coverage
Automatic Data Processing Inc., fixed charge coverage 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) | |||||||
| Net earnings | 2,598,500) | 2,466,500) | 2,292,800) | 1,620,800) | 1,733,400) | 1,492,500) | |
| Less: Net loss from discontinued operations | —) | —) | —) | —) | —) | (900) | |
| Add: Income tax expense | 762,700) | 716,100) | 712,800) | 550,300) | 797,700) | 741,300) | |
| Add: Interest expense | 59,700) | 107,100) | 129,900) | 102,700) | 80,000) | 56,200) | |
| Earnings before interest and tax (EBIT) | 3,420,900) | 3,289,700) | 3,135,500) | 2,273,800) | 2,611,100) | 2,290,900) | |
| Add: Operating lease cost | 166,700) | 176,500) | 270,100) | 234,900) | 234,500) | 271,300) | |
| Earnings before fixed charges and tax | 3,587,600) | 3,466,200) | 3,405,600) | 2,508,700) | 2,845,600) | 2,562,200) | |
| Interest expense | 59,700) | 107,100) | 129,900) | 102,700) | 80,000) | 56,200) | |
| Operating lease cost | 166,700) | 176,500) | 270,100) | 234,900) | 234,500) | 271,300) | |
| Fixed charges | 226,400) | 283,600) | 400,000) | 337,600) | 314,500) | 327,500) | |
| Solvency Ratio | |||||||
| Fixed charge coverage1 | 15.85 | 12.22 | 8.51 | 7.43 | 9.05 | 7.82 | |
| Benchmarks | |||||||
| Fixed Charge Coverage, Competitors2 | |||||||
| Accenture PLC | 10.41 | 9.66 | — | — | — | — | |
| Adobe Inc. | 25.59 | 18.77 | — | — | — | — | |
| AppLovin Corp. | 1.35 | — | — | — | — | — | |
| Cadence Design Systems Inc. | 13.77 | — | — | — | — | — | |
| Datadog Inc. | 0.55 | — | — | — | — | — | |
| International Business Machines Corp. | 3.13 | — | — | — | — | — | |
| Intuit Inc. | 25.58 | — | — | — | — | — | |
| Microsoft Corp. | 16.90 | — | — | — | — | — | |
| Oracle Corp. | 5.17 | — | — | — | — | — | |
| Palantir Technologies Inc. | -7.89 | — | — | — | — | — | |
| Palo Alto Networks Inc. | -1.09 | — | — | — | — | — | |
| Salesforce Inc. | 2.92 | — | — | — | — | — | |
| ServiceNow Inc. | 2.95 | — | — | — | — | — | |
| Synopsys Inc. | 9.29 | 7.46 | — | — | — | — | |
| Workday Inc. | -0.69 | — | — | — | — | — | |
| Fixed Charge Coverage, Sector | |||||||
| Software & Services | 9.14 | — | — | — | — | — | |
| Fixed Charge Coverage, Industry | |||||||
| Information Technology | 12.08 | — | — | — | — | — | |
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
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 3,587,600 ÷ 226,400 = 15.85
2 Click competitor name to see calculations.
The fixed charge coverage ratio demonstrates a significant strengthening trend over the six-year period from 2016 to 2021. The company's ability to cover its fixed financial obligations expanded substantially, shifting from a range of 7.43 to 9.05 between 2016 and 2019 to a much higher coverage level of 15.85 by June 30, 2021.
- Earnings Before Fixed Charges and Taxes
- Earnings exhibit a general growth trajectory, increasing from US$ 2,562,200 thousand in 2016 to US$ 3,587,600 thousand in 2021. While a temporary contraction occurred in 2018, where earnings fell to US$ 2,508,700 thousand, a strong recovery followed in 2019, with earnings surpassing US$ 3.4 billion and maintaining steady growth through 2021.
- Fixed Charges Trend
- Fixed charges showed volatility during the first four years, peaking at US$ 400,000 thousand in 2019. However, a marked reduction is observed in the subsequent two years, with charges falling to US$ 283,600 thousand in 2020 and further declining to US$ 226,400 thousand in 2021. This reduction in fixed obligations contributed significantly to the improvement in the solvency ratio.
- Fixed Charge Coverage Ratio Analysis
- The coverage ratio experienced moderate fluctuations between 2016 and 2019, reaching a period low of 7.43 in 2018. A sharp acceleration in the ratio began in 2020, rising to 12.22, and culminated in 15.85 in 2021. This acceleration is the result of a dual positive impact: the simultaneous increase in operational earnings and the decrease in total fixed charges.
The overall financial position regarding fixed charge obligations has shifted from a stable coverage level to a highly robust one. The divergence between rising earnings and falling fixed charges after 2019 indicates a substantial reduction in financial risk and an increased margin of safety for meeting fixed commitments.
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