The Gap, Inc. (GAP)

Cash conversion cycle

		Feb 3, 2024	Jan 28, 2023	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020
Days of inventory on hand (DOH)	days	79.90	85.01	109.79	98.36	76.77
Days of sales outstanding (DSO)	days	7.08	7.95	8.74	9.60	7.04
Number of days of payables	days	54.03	46.97	70.98	69.95	41.81
Cash conversion cycle	days	32.96	45.99	47.55	38.01	42.01

February 3, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 79.90 + 7.08 – 54.03
= 32.96

The cash conversion cycle of The Gap, Inc. has shown fluctuations over the past five years. In the most recent year ending February 3, 2024, the company's cash conversion cycle was 32.96 days, representing a significant improvement compared to the previous year's 45.99 days. This indicates that The Gap, Inc. was able to more efficiently convert its inventory and accounts receivable into cash during the latest fiscal period.

Looking back at historical data, we observe that the cash conversion cycle was the highest at 47.55 days ending January 29, 2022, and the lowest at 38.01 days ending January 30, 2021. These variations suggest potential challenges in managing the company's working capital efficiency and inventory turnover in certain years.

Overall, a decreasing trend in the cash conversion cycle is generally a positive sign as it signifies the company's ability to generate cash quickly from its operational activities. However, fluctuations in the cycle over the years indicate the need for continuous monitoring and strategic management of working capital to optimize cash flow and operational efficiency.