Degree Of Relative Liquidity - DRL

DEFINITION of 'Degree Of Relative Liquidity - DRL'

A liquidity metric that looks at a company's ability to support short-term expenditures. Degree of relative liquidity is determined by looking at the total percentage of cash that a company has available on hand. The cash must be earned through regular operations and be able to be spent on expenditures and short-term debt obligations through a specific period.

Companies that possess a higher degree of relative liquidity will probably have less difficulty in retrieving funds for payment purposes.

BREAKING DOWN 'Degree Of Relative Liquidity - DRL'

As with all liquidity metrics, indications that a company is barely able to make short-term payments can be a sign that the company could be facing more serious financial issues in the long term. Financial distress as a result of inability to make debt payments could lead to bankruptcy.

RELATED TERMS
  1. Liquidity

    The degree to which an asset or security can be quickly bought ...
  2. Statutory Reserves

    State regulated reserve requirements. Insurance companies must ...
  3. Bankruptcy Risk

    The possibility that a company will be unable to meet its debt ...
  4. Liquidity Risk

    The risk stemming from the lack of marketability of an investment ...
  5. Obligation

    The responsibility to meet the terms of a contract. If an obligation ...
  6. Insolvency

    When an individual or organization can no longer meet its financial ...
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. Markets

    Are Your Stocks Doomed?

    When a company is headed for trouble, the warning signs are usually there. Learn how to spot disaster.
  3. Investing

    Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!
  4. Markets

    Liquidity Measurement Ratios

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

    3 Risks Emerging Markets Debt Faces in 2016

    Learn about the major risks for emerging market debt in 2016. Discover how low interest rate policies by central banks fueled the growth of debt globally.
  6. Term

    The History and Purpose of TQM

    Total quality management explores processes to enhance quality and productivity.
  7. Stock Analysis

    5 Anticipated IPOs that Didn't Make it in 2015

    Pay attention to the IPO stock debt levels. Rising interest rates make debt more expensive. As the novelty of such an IPO stock fades, its price might follow.
  8. Term

    What's an Incumbency Certificate?

    An incumbency certificate lists an organization’s incumbent directors and officers.
  9. Entrepreneurship

    4 Signs Your Business is Ready for the Next Stage

    Is your business is ready for the next level? The signs may not be what you think. Structure, processes and mastering your revenue are the keys.
  10. Stock Analysis

    The Biggest Risks of Investing in Advanced Micro Devices Stock (AMD)

    Learn the biggest risks to Advanced Micro Devices stock, and discover the company's biggest competitors and how they threaten its market share.
RELATED FAQS
  1. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  2. What can working capital be used for?

    Working capital is used to cover all of a company's short-term expenses, including inventory, payments on short-term debt ... Read Full Answer >>
  3. Does working capital include short-term debt?

    Short-term debt is considered part of a company's current liabilities and is included in the calculation of working capital. ... Read Full Answer >>
  4. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  5. How can I calculate funds from operation in Excel?

    In general, the terms "work in progress" and "work in process" are used interchangeably to refer to products midway through ... Read Full Answer >>
  6. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center