Defensive Interval Ratio

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DEFINITION of 'Defensive Interval Ratio'

An efficiency ratio that measures how many days a company can operate without having to access non-current (long-term) assets.

The defensive interval ratio (DIR) is calculated as:

DIR = Current Assets / Daily Operational Expenses

Also known as the "Defensive Interval Period".

BREAKING DOWN 'Defensive Interval Ratio'

The DIR is thought by many people to be a better liquidity measure than the quick and current ratios. Because these ratios compare assets to liabilities rather than comparing assets to expenses, the DIR and current/quick ratios would give quite different results if the company had alot of expenses, but no debt.

The DIR is not a replacement to the other ratios, but a complement. As with all financial analysis, a prudent investor will use a basket of different analysis when deciding on whether a company is a good investment.

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