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Shares of Automatic Data Processing Inc. ADP<\/span> increased by 0.75% in the past three months. Before having a look at the importance of debt, let’s look at how much debt Automatic Data Processing has.<\/p>\n According to the Automatic Data Processing’s most recent financial statement as reported on November 2, 2022, total debt is at $3.16 billion, with $2.99 billion in long-term debt and $167.60 million in current debt. Adjusting for $1.21 billion in cash-equivalents, the company has a net debt of $1.95 billion.<\/p>\n Let’s define some of the terms we used in the paragraph above. Current debt<\/strong> is the portion of a company’s debt which is due within 1 year, while long-term debt<\/strong> is the portion due in more than 1 year. Cash equivalents<\/strong> includes cash and any liquid securities with maturity periods of 90 days or less. Total debt<\/strong> equals current debt plus long-term debt minus cash equivalents.<\/p>\n Shareholders look at the debt-ratio to understand how much financial leverage a company has. Automatic Data Processing has $46.36 billion in total assets, therefore making the debt-ratio 0.07. Generally speaking, a debt-ratio more than 1 means that a large portion of debt is funded by assets. As the debt-ratio increases, so the does the risk of defaulting on loans, if interest rates were to increase. Different industries have different thresholds of tolerance for debt-ratios. A debt ratio of 25% might be higher for one industry, but average for another.<\/p>\n Besides equity, debt is an important factor in the capital structure of a company, and contributes to its growth. Due to its lower financing cost compared to equity, it becomes an attractive option for executives trying to raise capital.<\/p>\n Interest-payment obligations can impact the cash-flow of the company. Having financial leverage also allows companies to use additional capital for business operations, allowing equity owners to retain excess profit, generated by the debt capital.<\/p>\n Looking for stocks with low debt-to-equity ratios? Check out Benzinga Pro, a market research platform which provides investors with near-instantaneous access to dozens of stock metrics – including debt-to-equity ratio. Click here to learn more<\/a>.<\/p>\nAutomatic Data Processing Debt<\/h2>\n
Why Debt Is Important<\/h2>\n