Defensive Interval Ratio Calculator
Calculate how many days a company can operate with current liquid assets
Calculate Defensive Interval Ratio
Current Assets
Cash on hand and short-term investments
Liquid securities easily convertible to cash
Money owed to the company by customers
Annual Operating Data
Total yearly operating costs
Depreciation, amortization, and other non-cash items
Defensive Interval Ratio Results
Formula: Defensive Interval Ratio = Current Assets ÷ Average Daily Expenditures
Calculation: $0 ÷ $0 = 0.0 days
Interpretation: The company can operate for 0.0 days using only liquid assets
Ratio Analysis
Example Calculation
Company Alpha Example
Cash & Equivalents: $10,000,000
Marketable Securities: $5,000,000
Accounts Receivable: $17,000,000
Annual Operating Expenses: $110,000,000
Annual Non-Cash Charges: $37,000,000
Calculation Steps
1. Current Assets = $10M + $5M + $17M = $32M
2. Daily Expenditures = ($110M - $37M) ÷ 365 = $200,000
3. DIR = $32M ÷ $200,000 = 160 days
Liquidity Ratio Comparison
Defensive Interval Ratio
Days company can operate
Most specific liquidity measure
Current Ratio
Current Assets ÷ Current Liabilities
General liquidity indicator
Quick Ratio
Liquid Assets ÷ Current Liabilities
Excludes inventory
Interpretation Guide
< 30 days
Poor liquidity, potential cash flow problems
30-90 days
Adequate but monitor cash flow closely
90-180 days
Good liquidity, comfortable buffer
> 180 days
Excellent but may indicate excess cash
Understanding Defensive Interval Ratio
What is Defensive Interval Ratio?
The Defensive Interval Ratio (DIR) is a liquidity ratio that measures how many days a company can sustain its operations using only its most liquid assets, without receiving any additional cash inflows or liquidating long-term assets.
Why is it Important?
- •Provides direct measure of financial resilience
- •Helps assess short-term financial health
- •More intuitive than other liquidity ratios
- •Useful for crisis scenario planning
Formula Components
DIR = Current Assets ÷ Average Daily Expenditures
- Current Assets: Cash + Marketable Securities + Accounts Receivable
- Average Daily Expenditures: (Annual Operating Expenses - Non-Cash Charges) ÷ 365
- Non-Cash Charges: Depreciation, amortization, and other non-cash items
Note: Higher ratios indicate better liquidity but may suggest excess cash holdings.
Advantages of DIR
- ✓Easy to understand and interpret
- ✓Provides specific time frame
- ✓Focuses on most liquid assets only
- ✓Useful for trend analysis over time
Limitations to Consider
- !Based on historical data, not future projections
- !Assumes no additional cash inflows
- !May not reflect seasonal variations
- !Quality of receivables matters