Darden Restaurants Inc (DRI)

Darden Restaurants Inc's liquidity ratios show a concerning trend over the years. The current ratio has consistently declined from 0.64 in May 31, 2022 to 0.38 in May 31, 2024, indicating a decrease in the company's ability to cover its short-term obligations with current assets.

Furthermore, the quick ratio, which excludes inventory from current assets, also depicts a worrisome pattern, decreasing from 0.23 in May 31, 2022 to 0.09 in May 31, 2024. This suggests that Darden Restaurants Inc may face challenges in meeting its immediate liabilities without relying on inventory.

Moreover, the cash ratio, which measures the firm's ability to cover its short-term obligations with its cash and cash equivalents, has also declined significantly from 0.23 in May 31, 2022 to 0.09 in May 31, 2024. This implies that the company may have limited cash reserves relative to its short-term obligations.

Overall, based on the trend in the liquidity ratios, Darden Restaurants Inc appears to be facing liquidity challenges, indicating a potential need to improve its cash management and working capital efficiency to ensure its financial health in the future.

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Additional liquidity measure

The cash conversion cycle of Darden Restaurants Inc has fluctuated over the past few years. As of May 31, 2022, the company's cash conversion cycle was 12.94 days, indicating that it takes the organization almost two weeks to convert its invested resources into cash.

By May 28, 2023, the cash conversion cycle had improved significantly to -10.16 days. A negative cash conversion cycle suggests that the company is able to collect cash from customers before paying its suppliers, resulting in a favorable working capital situation.

However, by May 31, 2023, the cash conversion cycle increased to 12.50 days, indicating that Darden Restaurants Inc took longer to convert its resources into cash compared to the previous year.

Subsequently, on May 26, 2024, the cash conversion cycle further deteriorated to -6.74 days. Although still negative, the reduction in the cash conversion cycle indicated that the company experienced challenges in effectively managing its working capital.

As of May 31, 2024, the cash conversion cycle stood at 11.81 days, a slight improvement from the previous year, but higher than the negative days recorded in 2023. Overall, Darden Restaurants Inc should continue to monitor its cash conversion cycle closely to enhance its cash flow management and operational efficiency.