Darden Restaurants Inc (DRI)

The liquidity ratios of Darden Restaurants Inc, specifically the current ratio, quick ratio, and cash ratio, have displayed a declining trend over the past five years.

The current ratio, which indicates the company's ability to cover its short-term liabilities with its current assets, has decreased from 1.01 in 2021 to 0.38 in 2024. This downward trend suggests that Darden Restaurants may be facing challenges in meeting its short-term obligations with its current asset base.

Similarly, the quick ratio, also known as the acid-test ratio, has declined from 0.69 in 2021 to 0.12 in 2024. This ratio focuses on the company's ability to cover its immediate liabilities with its most liquid assets, excluding inventory. The decreasing trend in the quick ratio indicates a potential strain on Darden Restaurants' ability to meet its short-term obligations without relying on inventory.

Furthermore, the cash ratio, which measures the company's ability to cover its current liabilities with its cash and cash equivalents, has also shown a downward trajectory from 0.66 in 2021 to 0.09 in 2024. This decline suggests that Darden Restaurants may have limited liquidity in terms of readily available cash to meet its current obligations.

In conclusion, the liquidity ratios of Darden Restaurants Inc have exhibited a concerning decline over the past five years, indicating potential liquidity challenges that the company may need to address to maintain its financial health and operational stability.

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Additional liquidity measure

The cash conversion cycle of Darden Restaurants Inc has shown fluctuating trends over the past five years. In the most recent fiscal year ending on May 26, 2024, the company's cash conversion cycle improved significantly to -6.74 days, compared to -10.16 days in the previous year. This indicates that Darden Restaurants Inc has become more efficient in managing its working capital and converting inventory and receivables into cash.

Looking back further, we observe that in May 29, 2022, the cash conversion cycle was -6.99 days, showing a slight increase in efficiency compared to the current year. In May 30, 2021, the cycle was at its longest at -11.39 days, suggesting that the company took longer to convert its resources into cash during that period. The shortest cash conversion cycle was recorded on May 31, 2020, at -2.27 days, indicating a strong performance in working capital management.

Overall, the trend in Darden Restaurants Inc's cash conversion cycle suggests a generally positive direction in the company's ability to efficiently manage its operating cycle and convert assets into cash. This improvement over the years is a positive sign of effective working capital management and liquidity.