Darden Restaurants Inc (DRI)

Based on the liquidity ratios of Darden Restaurants Inc, we can see a declining trend in the current ratio, which measures the company's ability to cover its short-term liabilities with its current assets. The current ratio has decreased from 0.64 on May 31, 2022, to 0.39 on February 28, 2025. This downward trend indicates that the company may be having difficulty in meeting its short-term obligations with its current assets.

Similarly, the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, has also shown a decreasing trend over the years. The quick ratio has declined from 0.26 on May 31, 2022, to 0.10 on February 28, 2025. This suggests that Darden Restaurants Inc may be facing challenges in meeting its immediate obligations without relying on selling inventory.

The cash ratio, which is the most conservative liquidity ratio as it only includes cash and cash equivalents in the numerator, has also displayed a downward trajectory. The cash ratio has decreased from 0.26 on May 31, 2022, to 0.10 on February 28, 2025. This indicates that the company's cash position relative to its current liabilities has been deteriorating over the period.

Overall, the declining trend in all three liquidity ratios suggests that Darden Restaurants Inc may be experiencing liquidity challenges and may need to closely monitor its working capital management to ensure it can meet its short-term obligations effectively.

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Additional liquidity measure

The cash conversion cycle of Darden Restaurants Inc shows fluctuations over the periods analyzed. The company's cash conversion cycle, which represents the time it takes for a company to convert its investments in inventory and other resources back into cash through sales, varied from positive to negative days throughout the data set.

For example, on May 31, 2022, the cash conversion cycle was 16.51 days, indicating that it takes Darden Restaurants Inc around 16.51 days to convert its resources into cash. This figure improved by August 28, 2022, where the cycle was -6.32 days, implying that the company was able to convert its resources into cash quickly and efficiently during this period.

The cycle continued to fluctuate, with periods of negative days indicating efficient cash generation and periods of positive days showing a longer conversion process. Despite the fluctuations, it is essential to analyze the reasons behind these changes in the cash conversion cycle to understand how efficiently the company manages its working capital, inventory management, and accounts receivable.