The Gap, Inc. (GAP)

The solvency ratios for The Gap, Inc. indicate the company's ability to meet its long-term financial obligations and manage its debt effectively.

1. Debt-to-assets ratio: This ratio shows the proportion of the company's assets financed by debt. The trend over the years shows a decrease from 0.16 in January 2021 to 0.13 in February 2025, indicating that the company has been reducing its reliance on debt to fund its assets.

2. Debt-to-capital ratio: This ratio reflects the extent to which a company is using debt to finance its operations compared to its equity. The trend shows a declining pattern from 0.46 in January 2021 to 0.31 in February 2025, suggesting that the company has improved its capital structure by decreasing its debt component relative to its overall capital.

3. Debt-to-equity ratio: This ratio measures the proportion of debt and equity used to finance the company's assets. The trend reveals a consistent decrease from 0.85 in January 2021 to 0.46 in February 2025, indicating a reduction in the company's reliance on debt financing in favor of equity.

4. Financial leverage ratio: This ratio highlights the company's financial leverage, representing the proportion of the company's assets financed by debt. The decreasing trend from 5.27 in January 2021 to 3.64 in February 2025 shows a positive sign as the company has reduced its financial leverage and reliance on debt in its capital structure.

In summary, the decreasing trends in these solvency ratios suggest that The Gap, Inc. has been effectively managing its debt levels, improving its capital structure, and enhancing its overall financial stability over the years.

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Coverage ratios

The interest coverage ratio reflects The Gap, Inc.'s ability to meet its interest obligations with its earnings. A ratio below 1 indicates that the company is not generating enough earnings to cover its interest expenses, which can be a concern.

Based on the data provided, The Gap, Inc. had a negative interest coverage ratio of -4.74 as of January 30, 2021, indicating a potential inability to cover its interest payments with its earnings during that period. However, the company managed to improve its interest coverage to 2.93 as of January 29, 2022, suggesting a better ability to meet its interest obligations.

Following this improvement, the interest coverage ratio fell back to a negative -0.58 on January 28, 2023, reflecting a potential deterioration in the company's ability to cover interest expenses. However, the ratio significantly improved to 7.18 as of February 3, 2024, indicating a strong ability to cover interest payments.

Subsequently, The Gap, Inc. demonstrated robust interest coverage with a ratio of 14.07 as of February 1, 2025, reflecting a substantial increase in earnings relative to its interest expenses. This positive trend suggests an enhanced financial position and reduced risk related to interest payment coverage for the company.