The Gap, Inc. (GAP)

The solvency ratios of The Gap, Inc. indicate the company's ability to meet its financial obligations and its overall financial risk. Over the past five years, the Debt-to-assets ratio has remained relatively stable, indicating that the company has effectively managed its debt levels in relation to its total assets.

The Debt-to-capital ratio has fluctuated slightly, with a decrease observed in 2022 compared to the prior year. This ratio measures the proportion of debt relative to the total capital structure of the company, including both debt and equity. The decrease in 2022 suggests a reduction in the company's reliance on debt financing.

The Debt-to-equity ratio reflects the proportion of debt financing versus equity financing in the company's capital structure. The Gap, Inc. has shown some fluctuations in this ratio over the years, with a notable increase in 2021 followed by a decrease in 2022. The company's higher Debt-to-equity ratio in 2021 indicates a greater reliance on debt to finance operations compared to equity.

The Financial leverage ratio indicates the extent to which the company is using debt to finance its assets. The Gap, Inc. has maintained a relatively stable financial leverage ratio over the years, with some fluctuation observed. A lower financial leverage ratio suggests lower financial risk as the company is relying less on debt to fund its operations.

Overall, the solvency ratios of The Gap, Inc. demonstrate that the company has managed its debt levels effectively, with a relatively stable financial leverage position over the past five years. This indicates a balanced approach to financing its operations and managing its financial risk.

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Coverage ratios

The interest coverage ratio for The Gap, Inc. has varied significantly over the past five years. In fiscal year 2024, the company had an interest coverage ratio of 7.18, indicating that it was able to cover its interest expenses 7.18 times over with its operating earnings. This suggests a strong ability to meet its interest obligations from its operating income.

However, in fiscal year 2023, the interest coverage ratio was negative at -0.58, which is a concerning indication as it implies that the company did not generate enough operating income to cover its interest expenses. This could signify financial distress or a significant decline in profitability.

In fiscal years 2022 and 2021, the interest coverage ratios improved to 2.93 and -4.74, respectively. While these ratios are better than a negative interest coverage, they still indicate a moderate risk as the company's operating income may not be sufficiently covering its interest payments.

In contrast, fiscal year 2020 saw The Gap, Inc. achieve a strong interest coverage ratio of 7.95, reflecting a robust ability to cover its interest expenses. Overall, there have been fluctuations in The Gap's ability to cover its interest obligations over the past five years, with the company showing both strengths and vulnerabilities in managing its debt servicing.