Darden Restaurants Inc (DRI)

Short-term

Turnover ratios

Activity ratios provide insight into how efficiently a company manages its assets and liabilities to generate sales. Let's analyze the activity ratios of Darden Restaurants Inc based on the provided data:

1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company sells and replaces its inventory within a given period. Darden Restaurants Inc's inventory turnover has fluctuated over the years, indicating changes in the company's inventory management efficiency.
- The ratio increased from 28.22 in May 31, 2022, to 30.91 in May 31, 2024, suggesting that the company improved its inventory turnover efficiency. A higher turnover generally indicates better management of inventory levels.

2. Receivables Turnover:
- The receivables turnover ratio indicates how efficiently a company collects its accounts receivable during a specific period. Darden Restaurants Inc had varying receivables turnover ratios over the years, with some years showing no data (indicated as "—").
- The available data suggests that Darden Restaurants Inc improved its receivables turnover efficiency, with an increase from 130.44 in May 28, 2023, to 144.01 in May 26, 2024. A higher turnover ratio implies a shorter time for the company to collect outstanding receivables.

3. Payables Turnover:
- The payables turnover ratio reflects how efficiently a company pays its suppliers or trade payables. Similar to receivables turnover, some years have missing data for payables turnover.
- Darden Restaurants Inc's payables turnover improved from 9.14 in May 28, 2023, to 10.74 in May 26, 2024. A higher turnover ratio indicates that the company is taking longer to pay its suppliers, possibly improving cash flow management.

4. Working Capital Turnover:
- The working capital turnover ratio assesses how effectively a company utilizes its working capital to generate sales. In the data provided, all years show no data for this ratio, indicating a lack of information to analyze the company's working capital turnover efficiency.

Overall, the analysis of these activity ratios suggests that Darden Restaurants Inc has made improvements in managing its inventory turnover, receivables turnover, and payables turnover, possibly enhancing its operational efficiency and working capital management over the years. However, the lack of data for working capital turnover limits a comprehensive assessment of the company's overall asset management effectiveness.

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Average number of days

Darden Restaurants Inc's activity ratios provide insights into its efficiency in managing inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH):
- The DOH indicates how many days, on average, Darden holds its inventory before selling it.
- From May 31, 2022 (12.94 days) to May 31, 2024 (11.81 days), Darden's DOH decreased, suggesting better inventory management efficiency.
- A lower DOH typically indicates faster inventory turnover, reducing holding costs and potential obsolescence risks.

2. Days of Sales Outstanding (DSO):
- DSO reflects how quickly Darden collects payments from its customers.
- Darden improved its DSO from 2.80 days on May 28, 2023, to 2.53 days on May 26, 2024, indicating effective receivables management.
- A lower DSO indicates faster cash conversion and better liquidity, strengthening Darden's financial position.

3. Number of Days of Payables:
- This ratio shows how long Darden takes to pay its suppliers.
- Darden's payables management improved from 39.95 days on May 28, 2023, to 33.98 days on May 26, 2024, indicating an extension in payment terms.
- Extending payables can enhance cash flow and working capital management, providing flexibility for operations and investments.

In summary, Darden Restaurants Inc demonstrated enhanced efficiency in managing inventory, receivables, and payables over the analyzed periods, which could positively impact its financial performance and operational effectiveness.

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Long-term

Darden Restaurants Inc's fixed asset turnover ratio has shown a fluctuating trend over the analyzed period. Starting at 1.41 in May 31, 2022, it increased to 1.72 by May 28, 2023, dropped to 1.48 by May 31, 2023, and then rose again to 1.70 by May 26, 2024. However, there is missing data for May 31, 2024.

On the other hand, the total asset turnover ratio has been relatively stable over the same period. It stood at 0.95 on May 31, 2022, and gradually increased to 1.02 by May 28, 2023, remaining at 1.02 by May 31, 2023, and further increasing to 1.01 by May 26, 2024. The data for May 31, 2024, is similar to the previous year at 1.01.

In interpreting these ratios, a higher fixed asset turnover indicates that the company is generating more sales from its fixed assets, which is generally seen as positive. On the other hand, the total asset turnover provides an overall picture of how effectively the company is using all its assets to generate revenue. The stability in total asset turnover suggests a consistent level of efficiency in utilizing both fixed and current assets to generate sales.