Degree Of Relative Liquidity - DRL

AAA

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.

INVESTOPEDIA EXPLAINS '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. Statutory Reserves

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

    The possibility that a company will be unable to meet its debt ...
  3. Insolvency

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

    1. The degree to which an asset or security can be bought or ...
  5. Liquidity Risk

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

    The legal responsibility to meet the terms of a contract. If ...
Related Articles
  1. Ratio Analysis Tutorial
    Fundamental Analysis

    Ratio Analysis Tutorial

  2. Are Your Stocks Doomed?
    Markets

    Are Your Stocks Doomed?

  3. Debt Reckoning
    Investing

    Debt Reckoning

  4. Liquidity Measurement Ratios
    Markets

    Liquidity Measurement Ratios

comments powered by Disqus
Hot Definitions
  1. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  2. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  3. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  6. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
Trading Center