Automatic Data Processing Inc. (NASDAQ:ADP)

Receivables turnover

The receivables turnover ratio showed an initial increase from 6.69 in 2016 to 7.27 in 2017, indicating improved efficiency in collecting receivables. However, this was followed by a gradual decline to 5.5 by 2021, suggesting a reduction in collection efficiency over the recent years.

Payables turnover

Payables turnover demonstrated a consistent increase from 44.91 in 2016 to a peak of 82.8 in 2020, indicating a trend of faster payments to suppliers. In 2021, the ratio decreased to 61.24, suggesting a moderation in the payment speed compared to the prior year.

Working capital turnover

Working capital turnover experienced significant growth from 3.19 in 2016 to 10.15 in 2020, reflecting enhanced utilization of working capital to generate sales. Nonetheless, this was followed by a notable decline to 5.67 in 2021, implying a reduction in operational efficiency regarding working capital management in the latest period.

Average receivable collection period

The average receivable collection period decreased from 55 days in 2016 to 50 days in 2017, indicating quicker collection. Afterward, it increased steadily to 66 days by 2021, consistent with the declining receivables turnover and suggesting slower collection of outstanding receivables over time.

Average payables payment period

There was stability in the average payables payment period at 8 days during 2016 and 2017, followed by a decrease to 4 days in 2020, indicating faster payment of obligations. In 2021, this period increased slightly to 6 days, reflecting a slight easing in payment speed relative to the previous year.

The financial data over the six-year period presents a consistent growth in revenues, with figures rising steadily from approximately $11.67 billion in 2016 to around $15.01 billion in 2021. This upward trend indicates robust sales and potentially effective market expansion or product acceptance over time.

Accounts receivable, net of allowances, follow a generally increasing trajectory, beginning at about $1.74 billion in 2016 and reaching approximately $2.73 billion by 2021. This rising balance could reflect higher credit sales associated with the revenue growth or a change in credit policies and customer payment behavior.

Receivables turnover shows variability over the years, starting at 6.69 in 2016, peaking to 7.27 in 2017, then experiencing a decline to 5.5 by 2021. The turnover ratio measures how efficiently the company collects its receivables; the decreasing trend after 2017 may suggest slower collection periods or relaxed credit terms, which could impact cash flow management.

Revenue Growth

Steady increase each year, with total revenues rising approximately 28.6% from 2016 to 2021.

Accounts Receivable

Consistent elevation in balances, up roughly 56.5% over the period, aligned with revenue increases but potentially indicating extended credit exposure.

Receivables Turnover Ratio

Fluctuates, with a peak in 2017, followed by a steady decrease, signaling slower collection efficiency in later periods.

Overall, the data suggest a positive sales momentum paired with increasing receivables that may require monitoring to ensure effective credit and cash management. The decrease in receivables turnover ratio warrants attention as it could impact liquidity if collection delays continue.

The financial data reveals several notable trends over the six-year period.

Costs of Revenues

There is a steady upward trend in the costs of revenues from 2016 to 2021. The value increased from approximately 6.84 billion US dollars in 2016 to 8.64 billion US dollars in 2021. This consistent growth suggests either an expansion in business operations, increased cost inputs, or a combination of both factors.

Accounts Payable

The accounts payable figures exhibit a different pattern. Starting at 152.3 million US dollars in 2016, there was a gradual decline until 2020 when the lowest value of 102 million US dollars was recorded. In 2021, there is a notable rebound to 141.1 million US dollars. This trend indicates a reduction in outstanding payables over most of the period, followed by a significant increase in the final year.

Payables Turnover Ratio

The payables turnover ratio shows an increasing trend from 44.91 in 2016 to a peak of 82.8 in 2020, indicating that payables were being settled more quickly over time. However, in 2021, this ratio declined to 61.24, suggesting a slowdown in the rate at which payables were paid off during the last year.

Overall, the data suggests rising costs alongside changing payables management. The increase in cost of revenues aligns with business growth, yet the fluctuations in accounts payable and payables turnover ratio may indicate shifts in supplier payment strategies or working capital management, particularly notable with the reversal of trends in 2021.

The financial data presents several notable trends in key performance metrics over the span of six years.

Working Capital

Working capital shows a declining trend from 2016 through 2020, decreasing from 3,653,000 to 1,437,500 thousand USD. This represents a significant reduction over four years. However, in 2021, working capital rebounded substantially to 2,647,000 thousand USD, indicating a recovery or strategic adjustment in the company's short-term financial position.

Revenues

Revenues demonstrate steady growth throughout the entire period. Starting at 11,667,800 thousand USD in 2016, revenues incrementally increased each year, reaching 15,005,400 thousand USD by 2021. This consistent upward trajectory suggests continuous expansion in business operations or market demand.

Working Capital Turnover

The working capital turnover ratio reveals meaningful shifts in operational efficiency. It increased markedly from 3.19 in 2016 to a peak of 10.15 in 2020, reflecting a more effective use of working capital to generate revenues. This improvement indicates that the company was able to handle higher sales volumes with less incremental working capital during this interval. However, in 2021, the ratio declined to 5.67, which correlates with the rise in working capital observed in that same year, potentially signaling either more conservative asset management or changes in operational cycles.

Overall, the data points to a company that experienced decreasing working capital requirements as revenues grew, enhancing capital efficiency until 2020. The reversal in 2021 suggests a strategic or operational shift, warranting further investigation to determine the underlying causes.

The financial data over the six-year period indicates a noticeable trend in the efficiency of receivables management as measured by both the receivables turnover ratio and the average receivable collection period.

Receivables Turnover

The receivables turnover ratio initially rose slightly from 6.69 in 2016 to a peak of 7.27 in 2017, suggesting enhanced effectiveness in converting receivables to cash during that period. However, from 2017 onwards, the ratio exhibits a general declining trend, falling to 5.5 by 2021.

Average Receivable Collection Period

The average receivable collection period shows an inverse relationship to the turnover ratio, decreasing from 55 days in 2016 to its lowest point of 50 days in 2017, implying improved collection efficiency at that time. Subsequently, the period lengthens consistently, reaching 66 days in 2021, indicative of slower collection processes.

Overall, the data reveals that after an initial improvement in receivables management up to mid-2017, the efficiency has deteriorated over the following years. This is evidenced by a declining turnover ratio alongside a progressively increasing collection period, potentially impacting cash flow and liquidity.

The financial data illustrates trends in the company's payables turnover ratio and the average payables payment period over six years, from June 2016 to June 2021.

Payables Turnover

The payables turnover ratio shows a generally increasing trend from 44.91 in June 2016 to a peak of 82.8 in June 2020, followed by a notable decline to 61.24 in June 2021. This trend indicates that the company increased the frequency with which it paid off its suppliers during the initial years, reaching its highest level in mid-2020. The subsequent decrease in 2021 suggests a slowing down in the rate at which payables are being settled.

Average Payables Payment Period

The average payables payment period, measured in days, decreased from 8 days in 2016 and 2017 to 6 days in 2018 and 2019, further shortening to 4 days in 2020 before rising again to 6 days in 2021. This pattern reflects an improvement in payment efficiency up until 2020, when the company was able to settle payables more rapidly, followed by a slight lengthening of the payment period in 2021.

Insights and Relationships

There is an inverse relationship between the payables turnover ratio and the average payment period, which is consistent with normal financial principles. As the payables turnover ratio increased, indicating more frequent payments, the payment period decreased, implying faster settlements. The notable decrease in turnover and corresponding increase in days during 2021 could suggest either strategic changes in payment policies, liquidity considerations, or external factors impacting operational timing.