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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Automatic Data Processing Inc., economic profit calculation

US$ in thousands

12 months ended:	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
Net operating profit after taxes (NOPAT)¹	2,334,712)	2,508,856)	2,290,136)	1,628,778)	1,771,847)	1,527,436)
Cost of capital²	10.64%	10.62%	10.66%	10.63%	10.55%	10.45%
Invested capital³	10,152,600)	9,580,300)	9,463,158)	7,289,794)	7,519,836)	7,921,908)

Economic profit⁴	1,253,996)	1,491,849)	1,281,656)	853,754)	978,256)	699,675)

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 NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,334,712 – 10.64% × 10,152,600 = 1,253,996

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Automatic Data Processing Inc. economic profit increased from 2019 to 2020 but then decreased significantly from 2020 to 2021.

Automatic Data Processing Inc., NOPAT calculation

US$ in thousands

12 months ended:	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
Net earnings	2,598,500)	2,466,500)	2,292,800)	1,620,800)	1,733,400)	1,492,500)
Deferred income tax expense (benefit)¹	(251,100)	26,000)	9,300)	500)	8,100)	700)
Increase (decrease) in allowance for doubtful accounts²	(12,900)	37,600)	3,600)	1,700)	11,500)	2,600)
Increase (decrease) in deferred revenues³	(16,800)	(36,900)	(53,800)	(20,000)	10,000)	23,000)
Increase (decrease) in equity equivalents⁴	(280,800)	26,700)	(40,900)	(17,800)	29,600)	26,300)
Interest expense	59,700)	107,100)	129,900)	102,700)	80,000)	56,200)
Interest expense, operating lease liability⁵	9,634)	10,118)	15,200)	14,153)	12,510)	13,101)
Adjusted interest expense	69,334)	117,218)	145,100)	116,853)	92,510)	69,301)
Tax benefit of interest expense⁶	(14,560)	(24,616)	(30,471)	(32,836)	(32,379)	(24,255)
Adjusted interest expense, after taxes⁷	54,774)	92,602)	114,629)	84,017)	60,132)	45,046)
(Gain) loss on marketable securities	(11,300)	(12,900)	900)	2,500)	(2,200)	5,000)
Interest income on corporate funds	(36,500)	(84,500)	(97,600)	(83,500)	(76,700)	(62,400)
Investment income, before taxes	(47,800)	(97,400)	(96,700)	(81,000)	(78,900)	(57,400)
Tax expense (benefit) of investment income⁸	10,038)	20,454)	20,307)	22,761)	27,615)	20,090)
Investment income, after taxes⁹	(37,762)	(76,946)	(76,393)	(58,239)	(51,285)	(37,310)
(Income) loss from discontinued operations, net of tax¹⁰	—)	—)	—)	—)	—)	900)
Net operating profit after taxes (NOPAT)	2,334,712)	2,508,856)	2,290,136)	1,628,778)	1,771,847)	1,527,436)

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 Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in deferred revenues.

⁴ Addition of increase (decrease) in equity equivalents to net earnings.

⁵ 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 437,900 × 2.20% = 9,634

⁶ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 69,334 × 21.00% = 14,560

⁷ Addition of after taxes interest expense to net earnings.

⁸ 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 47,800 × 21.00% = 10,038

⁹ Elimination of after taxes investment income.

¹⁰ Elimination of discontinued operations.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Automatic Data Processing Inc. NOPAT increased from 2019 to 2020 but then slightly decreased from 2020 to 2021 not reaching 2019 level.

Automatic Data Processing Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
Provision for income taxes	762,700)	716,100)	712,800)	550,300)	797,700)	741,300)
Less: Deferred income tax expense (benefit)	(251,100)	26,000)	9,300)	500)	8,100)	700)
Add: Tax savings from interest expense	14,560)	24,616)	30,471)	32,836)	32,379)	24,255)
Less: Tax imposed on investment income	10,038)	20,454)	20,307)	22,761)	27,615)	20,090)
Cash operating taxes	1,018,322)	694,262)	713,664)	559,875)	794,364)	744,765)

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).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Automatic Data Processing Inc. cash operating taxes decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Automatic Data Processing Inc., invested capital calculation (financing approach)

US$ in thousands

	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
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)
Operating lease liability¹	437,900)	439,900)	542,858)	484,694)	428,436)	445,608)
Total reported debt & leases	3,446,400)	2,458,100)	2,807,058)	2,487,094)	2,430,836)	2,453,308)
Stockholders’ equity	5,670,100)	5,752,200)	5,399,900)	3,459,600)	3,977,000)	4,481,600)
Net deferred tax (assets) liabilities²	434,700)	693,200)	595,900)	17,200)	69,700)	150,800)
Allowance for doubtful accounts³	79,600)	92,500)	54,900)	51,300)	49,600)	38,100)
Deferred revenues⁴	566,300)	583,100)	620,000)	604,300)	624,300)	614,300)
Equity equivalents⁵	1,080,600)	1,368,800)	1,270,800)	672,800)	743,600)	803,200)
Accumulated other comprehensive (income) loss, net of tax⁶	(10,600)	14,800)	257,300)	680,800)	379,200)	215,100)
Adjusted stockholders’ equity	6,740,100)	7,135,800)	6,928,000)	4,813,200)	5,099,800)	5,499,900)
Marketable securities⁷	(33,900)	(13,600)	(271,900)	(10,500)	(10,800)	(31,300)
Invested capital	10,152,600)	9,580,300)	9,463,158)	7,289,794)	7,519,836)	7,921,908)

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 Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenues.

⁵ Addition of equity equivalents to stockholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Automatic Data Processing Inc. invested capital increased from 2019 to 2020 and from 2020 to 2021.

Automatic Data Processing Inc., cost of capital calculations

Jun 30, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	89,693,078)	89,693,078)	÷	93,221,778)	=	0.96	0.96	×	10.99%	=	10.57%
Debt³	3,090,800)	3,090,800)	÷	93,221,778)	=	0.03	0.03	×	2.37% × (1 – 21.00%)	=	0.06%
Operating lease liability⁴	437,900)	437,900)	÷	93,221,778)	=	0.00	0.00	×	2.20% × (1 – 21.00%)	=	0.01%
Total:	93,221,778)					1.00					10.64%

Based on: 10-K (reporting date: 2021-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	57,946,438)	57,946,438)	÷	60,533,038)	=	0.96	0.96	×	10.99%	=	10.52%
Debt³	2,146,700)	2,146,700)	÷	60,533,038)	=	0.04	0.04	×	2.91% × (1 – 21.00%)	=	0.08%
Operating lease liability⁴	439,900)	439,900)	÷	60,533,038)	=	0.01	0.01	×	2.30% × (1 – 21.00%)	=	0.01%
Total:	60,533,038)					1.00					10.62%

Based on: 10-K (reporting date: 2020-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	72,785,232)	72,785,232)	÷	75,660,390)	=	0.96	0.96	×	10.99%	=	10.57%
Debt³	2,332,300)	2,332,300)	÷	75,660,390)	=	0.03	0.03	×	2.80% × (1 – 21.00%)	=	0.07%
Operating lease liability⁴	542,858)	542,858)	÷	75,660,390)	=	0.01	0.01	×	2.80% × (1 – 21.00%)	=	0.02%
Total:	75,660,390)					1.00					10.66%

Based on: 10-K (reporting date: 2019-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	58,812,610)	58,812,610)	÷	61,286,304)	=	0.96	0.96	×	10.99%	=	10.55%
Debt³	1,989,000)	1,989,000)	÷	61,286,304)	=	0.03	0.03	×	2.92% × (1 – 28.10%)	=	0.07%
Operating lease liability⁴	484,694)	484,694)	÷	61,286,304)	=	0.01	0.01	×	2.92% × (1 – 28.10%)	=	0.02%
Total:	61,286,304)					1.00					10.63%

Based on: 10-K (reporting date: 2018-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	49,498,904)	49,498,904)	÷	51,999,240)	=	0.95	0.95	×	10.99%	=	10.46%
Debt³	2,071,900)	2,071,900)	÷	51,999,240)	=	0.04	0.04	×	2.92% × (1 – 35.00%)	=	0.08%
Operating lease liability⁴	428,436)	428,436)	÷	51,999,240)	=	0.01	0.01	×	2.92% × (1 – 35.00%)	=	0.02%
Total:	51,999,240)					1.00					10.55%

Based on: 10-K (reporting date: 2017-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	40,905,387)	40,905,387)	÷	43,499,695)	=	0.94	0.94	×	10.99%	=	10.34%
Debt³	2,148,700)	2,148,700)	÷	43,499,695)	=	0.05	0.05	×	2.94% × (1 – 35.00%)	=	0.09%
Operating lease liability⁴	445,608)	445,608)	÷	43,499,695)	=	0.01	0.01	×	2.94% × (1 – 35.00%)	=	0.02%
Total:	43,499,695)					1.00					10.45%

Based on: 10-K (reporting date: 2016-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Automatic Data Processing Inc., economic spread 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)
Economic profit¹	1,253,996)	1,491,849)	1,281,656)	853,754)	978,256)	699,675)
Invested capital²	10,152,600)	9,580,300)	9,463,158)	7,289,794)	7,519,836)	7,921,908)
Performance Ratio
Economic spread ratio³	12.35%	15.57%	13.54%	11.71%	13.01%	8.83%
Benchmarks
Economic Spread Ratio, Competitors⁴
Accenture PLC	10.30%	10.87%	9.60%	—	—	—
Adobe Inc.	13.01%	5.28%	3.39%	1.04%	—	—
Autodesk Inc.	-3.07%	4.57%	-16.45%	—	—	—
Cadence Design Systems Inc.	10.03%	10.83%	5.31%	—	—	—
CrowdStrike Holdings Inc.	-4.54%	6.34%	—	—	—	—
International Business Machines Corp.	-4.38%	-4.11%	-0.39%	—	—	—
Intuit Inc.	2.32%	5.67%	19.32%	—	—	—
Microsoft Corp.	33.07%	31.09%	26.20%	—	—	—
Oracle Corp.	7.02%	1.34%	4.03%	—	—	—
Palo Alto Networks Inc.	-2.26%	-3.27%	-0.06%	—	—	—
Salesforce Inc.	-7.62%	-10.66%	-6.64%	—	—	—
ServiceNow Inc.	5.44%	7.06%	6.47%	—	—	—
Synopsys Inc.	-3.32%	-3.15%	-6.13%	-7.49%	—	—

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 Economic profit. See details »

² Invested capital. See details »

³ 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,253,996 ÷ 10,152,600 = 12.35%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Automatic Data Processing Inc. economic spread ratio improved from 2019 to 2020 but then deteriorated significantly from 2020 to 2021.

Automatic Data Processing Inc., economic profit margin 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)
Economic profit¹	1,253,996)	1,491,849)	1,281,656)	853,754)	978,256)	699,675)

Revenues	15,005,400)	14,589,800)	14,175,200)	13,325,800)	12,379,800)	11,667,800)
Add: Increase (decrease) in deferred revenues	(16,800)	(36,900)	(53,800)	(20,000)	10,000)	23,000)
Adjusted revenues	14,988,600)	14,552,900)	14,121,400)	13,305,800)	12,389,800)	11,690,800)
Performance Ratio
Economic profit margin²	8.37%	10.25%	9.08%	6.42%	7.90%	5.98%
Benchmarks
Economic Profit Margin, Competitors³
Accenture PLC	5.28%	5.53%	4.43%	—	—	—
Adobe Inc.	16.21%	7.58%	5.09%	1.70%	—	—
Autodesk Inc.	-4.23%	6.04%	-26.81%	—	—	—
Cadence Design Systems Inc.	10.19%	10.91%	5.15%	—	—	—
CrowdStrike Holdings Inc.	-9.43%	5.56%	—	—	—	—
International Business Machines Corp.	-8.35%	-7.15%	-0.66%	—	—	—
Intuit Inc.	2.94%	6.38%	12.87%	—	—	—
Microsoft Corp.	27.45%	23.08%	19.38%	—	—	—
Oracle Corp.	13.89%	3.05%	7.34%	—	—	—
Palo Alto Networks Inc.	-3.04%	-5.31%	-0.06%	—	—	—
Salesforce Inc.	-17.47%	-26.23%	-13.07%	—	—	—
ServiceNow Inc.	4.70%	5.76%	4.74%	—	—	—
Synopsys Inc.	-5.29%	-5.40%	-10.60%	-12.79%	—	—

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 Economic profit. See details »

² 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 1,253,996 ÷ 14,988,600 = 8.37%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Automatic Data Processing Inc. economic profit margin improved from 2019 to 2020 but then deteriorated significantly from 2020 to 2021.

Automatic Data Processing Inc. (NASDAQ:ADP)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin