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Analyze, Forecast, and Interpret Income Statement and Balance Sheet Following are the income statement and balance sheet of ADP Inc. DATA PROCESSING INC. Statement of

Analyze, Forecast, and Interpret Income Statement and Balance Sheet Following are the income statement and balance sheet of ADP Inc.

DATA PROCESSING INC.
Statement of Consolidated Earnings
For Year Ended June 30, 2019, $ millions
Total revenues $14,175.2
Operating expenses 7,145.9
Systems development and programming costs 636.3
Depreciation and amortization 304.4
Total cost of revenues 8,086.6
Selling, general, and administrative expenses 3,064.2
Interest expense 129.9
Total expenses 11,280.7
Other (income) expense, net (111.1)
Earnings before income taxes 3,005.6
Provision for income taxes 712.8
Net earnings $2,292.8

DATA PROCESSING INC.
Balance Sheet
$ millions June 30, 2019
Current assets
Cash and cash equivalents $1,949.2
Accounts receivable, net 2,439.3
Other current assets 519.6
Total current assets before funds held for clients 4,908.1
Funds half for clients 29,434.2
Total current assets 34,342.3
Long-term receivables, net 23.8
Property, plant and equipment, net 764.2
Capitalized contract cost, net 2,428.5
Other assets 934.4
Goodwill 2,323.0
Intangible assets, net 1,071.5
Total assets $41,887.7
Current liabilities
Accounts payable $125.5
Accrued expenses and other current liabilities 1,759.0
Accrued payroll and payroll-related expenses 721.1
Dividends payable 340.1
Short-term deferred revenues 220.7
Obligations under reverse repurchase agreements 262.0
Income taxes payable 54.8
Total current liabilities before client funds obligations 3,483.2
Client funds obligations 29,144.5
Total current liabilities 32,627.7
Long-term debt 2,002.2
Other liabilities 798.7
Deferred income taxes 659.9
Long-term deferred revenues 399.3
Total liabilities 36,487.8
Shareholders' equity
Preferred stock, $1.00 par value; Authorized, 0.3 shares; issued , none
Common stock, $0.10 par value; Authorized, 1,000.0 shares;
issued, 638.7 shares; outstanding 434.2 shares 63.9
Capital in excess of par value 1,183.2
Retained earnings 17,500.6
Treasury stock, at cost: 204.5 shares (13,090.5)
Accumulated other comprehensive loss (257.3)
Total stockholders' equity 5,399.9
Total liabilities and stockholders' equity $41,887.7

Assume total revenues grow by 13% in 2020. All other percentages (other than sales growth and provision for income taxes) are based on historic percent of total revenues.

  • CAPEX for 2020 will be 1.1% of total revenue, and depreciation will be $184.4 million.
  • Goodwill, long-term debt, preferred stock, common stock, and Accumulated other comprehensive loss will not change for the year.
  • The company will acquire intangibles equal to 2.9% of total revenues and will record amortization expense of $276.1 million.
  • Income taxes will be 25% of pretax income and income taxes payable will be 7.7% of 2020 tax expense.
  • The company will award $167.3 million of stock-based compensation, which increases Capital in excess of par value by the same amount. Assume that the company routinely includes this form of compensation in operating expenses each year.
  • The company will continue its stock repurchases. DP will repurchase $750 million of treasury stock.
  • Dividends will be $1,389.40 in 2020, and dividends payable will be 26.3% of dividends.

Prepare a forecast of FY2020 statement of cash flows. Note: Round your answers to one decimal place (for example, enter 14.6 for 14.55555).

image text in transcribed

Prepare a forecast of FY2020 statement of cash flows. Note: Round your answers to one decimal place (for example, enter 14.6 for 14.55555). AUTOMATIC DATA PROCESSING, INC. Forecasted Statement of Cash Flows For Year Ended $ millions June 2020 Net income (loss) $ 0 x Add: Depreciation Add: Amortization Add: Stock based compensation 0 X Accounts receivable, net OX Other current assets Funds held for clients Long-term receivables, net Capitalized Contract Cost, Net 0 x Other assets OX Accounts payable Accrued expenses and other current liabilities Accrued payroll and payroll-related expenses 0 x Short-term deferred revenues OX Obligations under reverse repurchase agreements Income taxes payable Client funds obligations Other liabilities 0 x Deferred income taxes 0x Long-term deferred revenues Operating cash flow Capital Expenditures Additional intangibles acquired OX Net cash from investing activities Dividends Dividends payable Stock buy backs Net cash from financing activities Net change in cash Beginning cash Ending cash 0X 0 X $

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