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. Obligation

    The legal responsibility to meet the terms of a contract. If ...
  4. Liquidity Ratios

    A class of financial metrics that is used to determine a company's ...
  5. Liquidity Risk

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

    1. The degree to which an asset or security can be bought or ...
RELATED FAQS
  1. 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 >>
  2. How does a company obtain a bank guarantee?

    A bank guarantee serves as a promise from a commercial bank that the liability of a particular debtor will be met if contractual ... Read Full Answer >>
  3. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
  4. What is the difference between perfect and imperfect competition?

    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>
  5. How difficult is it to understand business analytics?

    In the abstract, business analytics is the study of financial, economic, consumer and production data through statistical ... Read Full Answer >>
  6. At what levels are core competencies required for businesses operating in the primary ...

    Core competencies help businesses understand their best abilities to perform in the market. Primary sector businesses mine ... Read Full Answer >>
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. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  6. Economics

    Understanding Subordinated Debt

    A loan or security that ranks below other loans or securities with regard to claims on assets or earnings.
  7. Economics

    Understanding Economic Order Quantity

    Economic order quantity is an inventory-related equation that determines the optimum order quantity that a company should hold in its inventory.
  8. Economics

    What is Net Margin?

    The ratio of net profits to revenues for a company that shows how much of each dollar earned by the company is translated into profits.
  9. Investing Basics

    What is a Stock Option?

    An employee stock option is a right given to an employee to buy a certain number of company stock shares at a certain time and price in the future.
  10. Economics

    Understanding Marginal Cost of Production

    Marginal cost of production is an economics term that refers to the change in production costs resulting from producing one more unit.

You May Also Like

Hot Definitions
  1. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  2. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  3. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  4. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  5. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
Trading Center