Darden Restaurants Inc (DRI)

The liquidity ratios of Darden Restaurants Inc. exhibit a trend of decline over the analyzed period, reflecting shifts in the company's ability to meet short-term obligations with liquid assets. The current ratio, which measures the company's capacity to cover current liabilities with total current assets, was stable at 0.51 on May 28 and 31, 2023. However, it decreased to 0.38 by May 26 and 31, 2024, and experienced a slight uptick to 0.42 on May 31, 2025. These figures indicate a weakening in the company's overall short-term liquidity position over time, as the ratio remains below the generally accepted benchmark of 1.0, suggesting limited current assets relative to current liabilities.

The quick ratio, a more stringent measure of liquidity excluding inventory, followed a similar downward trend, declining from 0.23 on May 28 and 31, 2023, to 0.12 in late May 2024, before increasing modestly to 0.15 by May 31, 2025. The ratio consistently remains well below 1.0 throughout the period, indicating that the company has a limited capacity to cover immediate liabilities with its most liquid assets, such as cash and receivables.

Similarly, the cash ratio, which measures the company's ability to cover current liabilities solely with cash and cash equivalents, was steady at 0.19 at the end of May 2023. It then declined to 0.09 in the same period of 2024, reflecting a diminished holding of cash relative to current liabilities. By May 31, 2025, the cash ratio slightly increased to 0.11, but still remains well below the ideal benchmark, signifying a constrained cash position to meet urgent liabilities.

In summary, Darden Restaurants Inc.'s liquidity ratios reveal a persistent and notable downward trend over the analyzed period, illustrating increasingly tight short-term liquidity conditions. The ratios, all below the standard threshold of 1.0, suggest that the company may face challenges in readily meeting its short-term obligations without additional liquidity sources or operational improvements.

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Additional liquidity measure

The data indicates that Darden Restaurants Inc.'s cash conversion cycle (CCC) has exhibited variability over the provided periods, reflecting dynamics in its operational efficiency and working capital management. As of May 28, 2023, the CCC was approximately -10.16 days, suggesting that the company effectively generates cash from its operations prior to the completion of its payment cycles. This negative cycle persisted on May 31, 2023, but decreased slightly to -3.22 days, indicating a reduction in the extent to which cash inflows precede cash outflows.

In the subsequent year, the CCC improved to an even more negative value of -6.74 days by May 26, 2024, implying an increase in the company's operational efficiency or favorable shifts in receivables and inventory management. However, by May 31, 2024, the CCC slightly declined to -1.90 days, signaling a slight reduction in this efficiency. Moving into May 2025, the CCC again reverted to a more negative value, approximately -9.94 days, indicating a return to more favorable cash flow timing relative to payments.

Overall, the negative CCC across all periods denotes that Darden Restaurants Inc. consistently manages to generate positive cash flows ahead of its payment obligations, which is advantageous for liquidity management. The fluctuations suggest periods of operational adjustments or strategic initiatives affecting receivables, inventory, and payable cycles. Despite these variations, the company maintains a generally efficient working capital profile, with a tendency towards cash inflows occurring prior to cash outflows, thus supporting its liquidity position and operational flexibility.