Defensive Interval Ratio

AAA

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".

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Quick Ratio

    An indicator of a company’s short-term liquidity. The quick ratio ...
  2. Working Ratio

    A ratio used to measure a company's ability to recover operating ...
  3. Expense

    1. The economic costs that a business incurs through its operations ...
  4. Current Assets

    1. A balance sheet account that represents the value of all assets ...
  5. Current Liabilities

    A company's debts or obligations that are due within one year. ...
  6. Current Ratio

    A liquidity ratio that measures a company's ability to pay short-term ...
Related Articles
  1. Fundamental Analysis

    Ratio Analysis Tutorial

    If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
  2. Investing Basics

    Analyze Investments Quickly With Ratios

    Make informed decisions about your investments with these easy equations.
  3. Fundamental Analysis

    Dynamic Current Ratio: What It Is And How To Use It

    Learn why this ratio may be a good alternative to the current, cash and quick ratios.
  4. Markets

    Liquidity Measurement Ratios

    Learn about the current ratio, quick ratio, cash ratio and cash conversion cycle.
  5. Markets

    Operating Performance Ratios

    Learn about the fixed-asset turnover, sales/revenue per employee, operating cycle and dividend payout ratio.
  6. Markets

    Profitability Indicator Ratios

    Learn about profit margin analysis, effective tax rate, return on assets, return on equity and return on capital employed.
  7. Fundamental Analysis

    What is a bad interest coverage ratio?

    Understand how interest coverage ratio is calculated and what it signifies, and learn what market analysts consider to be an unacceptably low coverage ratio.
  8. Active Trading Fundamentals

    What is liquidity risk?

    Learn how to distinguish between the two broad types of financial liquidity risk: funding liquidity risk and market liquidity risk.
  9. Technical Indicators

    What is a good gearing ratio?

    Understand the meaning of the gearing ratio, how it is calculated, the definition of high and low gearing, and how they reflect relative financial stability.
  10. Fundamental Analysis

    What is the difference between a capital gearing ratio and a net gearing ratio?

    Understand the definition of gearing in the finance industry, the difference between net gearing and capital gearing ratios and how they are interpreted.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center