Darden Restaurants Inc (DRI)

The liquidity ratios for Darden Restaurants Inc. over the specified periods reveal a consistent position of constrained liquidity, characterized by ratios that generally remain below ideal thresholds for liquidity robustness.

Current Ratio:
The current ratio displays a trend of modest fluctuation within a narrow range, primarily between 0.36 and 0.52. Historically, the ratio historically peaked around 0.52 in August 2022 and gradually declined over time, reaching a low of 0.35 in August 2024 before slightly increasing again to 0.42 in May 2025. These figures indicate that, at most times, current assets only marginally cover current liabilities, suggesting potential liquidity constraints.

Quick Ratio:
The quick ratio, which excludes inventory and other less liquid assets, mirrors the overarching trend of constrained liquidity, moving mainly between 0.11 and 0.23. The highest readings are observed in early periods, notably 0.23 in August 2022 and May 2023, while the ratio significantly dipped to as low as 0.11 in August 2024. Such values point to a limited capacity to meet short-term obligations with the company's most liquid assets, raising concerns about immediate liquidity sufficiency during certain periods.

Cash Ratio:
The cash ratio, reflecting the company's capacity to cover current liabilities with cash and cash equivalents, is consistently the lowest among the three ratios, ranging from 0.08 to 0.21. Early measurements align with ratios around 0.21 in August 2022 and decline to lows near 0.08-0.09 in recent periods, before marginally increasing to 0.11 by May 2025. The persistently low cash ratio underscores a limited pool of liquid cash assets available to meet short-term obligations, emphasizing reliance on other forms of liquidity or cash flows.

Overall Interpretation:
Across all three liquidity ratios, Darden Restaurants Inc. exhibits a pattern of relatively tight liquidity positioning over the analyzed periods. The ratios suggest that the company maintains minimal buffers of liquid assets against current liabilities, potentially reflecting strategic management of working capital, operational efficiencies, or underlying financial stress. The observed trend indicates a need for close monitoring, as declining ratios could threaten short-term solvency if not managed appropriately. The marginal improvements noted in the latest periods suggest some stabilization, yet overall liquidity remains constrained within low to moderate levels, highlighting the importance of ongoing liquidity risk assessment.

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Additional liquidity measure

The analysis of Darden Restaurants Inc.'s cash conversion cycle (CCC) over the referenced period reveals a consistent trend of negative values, indicating a continual receipt of cash from operations before the settlement of operational liabilities such as inventory and accounts payable.

Throughout the period from August 2022 to May 2025, the CCC exhibited relatively stable negativity, fluctuating within a narrow range but showing a gradual upward trend toward less negative figures. Specifically, at the start of the period, the CCC was approximately -6.44 days, reflecting that the company was collecting cash roughly six days before settling its payables. Over time, this metric steadily moved toward a less negative value, ending at approximately -4.45 days in May 2025.

This shift towards shorter negative cycles suggests an improving cash flow position, whereby the company is collecting receivables slightly faster or possibly delaying its payables marginally. The overall movement indicates enhanced efficiency in managing cash flows, reducing the time lag between cash inflows and outflows.

Additionally, the persistent negative cycle underscores effective working capital management, with Darden Restaurants efficiently converting inventory and receivables into cash more rapidly than it discharges its payables. The gradual trend toward less negative values may reflect strategic adjustments in supplier terms, receivable collection policies, or operational efficiencies aimed at optimizing liquidity.

In summary, Darden Restaurants Inc.'s cash conversion cycle has remained consistently negative, underscoring a favorable cash flow profile where cash inflows precede outflows. The slight upward trend toward zero indicates ongoing improvements in operational working capital management, which could further enhance liquidity and operational efficiency over time.