The Gap, Inc. (GAP)

The current ratio of The Gap, Inc. has shown some fluctuations over the years, starting at 1.55 in January 30, 2021, dropping to its lowest point of 1.27 in January 29, 2022, and then gradually improving to 1.60 by February 1, 2025. This indicates that the company's ability to cover its short-term liabilities with current assets has varied but has generally strengthened over time.

The quick ratio, which focuses on the most liquid assets, also reflects fluctuations for The Gap, Inc. It was at its lowest point of 0.31 in January 29, 2022, indicating a potential issue with short-term liquidity at that time. However, the ratio improved in subsequent years, reaching 0.89 by February 1, 2025, showing a better ability to cover short-term obligations with liquid assets.

Moreover, the cash ratio, which specifically measures the ability to cover current liabilities with cash and cash equivalents, has shown similar trends. Starting at 0.62 in January 30, 2021, dropping to 0.22 by January 29, 2022, and then steadily increasing to 0.79 by February 1, 2025. This indicates an enhancement in the company's cash position and its ability to meet short-term obligations solely with cash reserves.

Overall, while the liquidity ratios of The Gap, Inc. have experienced fluctuations, the company has shown improvement in its ability to meet short-term obligations with current assets, liquid assets, and cash reserves over the years.

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Additional liquidity measure

The Cash Conversion Cycle (CCC) of The Gap, Inc. has shown fluctuations over the past five years. In January 2021, the company's CCC was 38.01 days, indicating that it took approximately 38 days for the company to convert its investments in inventory and other resources into cash flows from sales.

By January 2022, the CCC had increased to 47.55 days, suggesting a delay in the conversion of resources to cash. However, in January 2023, there was a slight improvement as the CCC decreased to 45.99 days.

In February 2024, the CCC significantly improved to 32.96 days, indicating better efficiency in managing the conversion cycle. The most recent data from February 2025 shows a further improvement in the CCC to 31.14 days, demonstrating the company's effectiveness in managing inventory and receivables to generate cash flows from sales more efficiently.

Overall, The Gap, Inc. has displayed varied performance in its cash conversion cycle over the years, with fluctuations indicating potential challenges in managing working capital effectively. The recent improvements in the CCC suggest ongoing efforts to optimize inventory management and enhance cash flow generation from operational activities.