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Defensive Interval Ratio Calculator

Enter liquid assets, annual operating expenses and the period to get the defensive interval in days.

How it is calculated

The tool first spreads annual operating expenses over the days in the year, then asks how many of those days the liquid assets would cover: daily expenses = annual expenses / days and DIR = liquid assets / daily expenses. Liquid assets are cash, marketable securities and receivables, in the same currency as the expenses. The days box is optional and defaults to 365; entering 360 gives a slightly different answer. Expenses and days must be above zero, and liquid assets cannot be negative. The result is a number of days with two decimals. Use cash operating expenses, not figures that include depreciation or other non-cash charges, for the most realistic runway.

Worked example

A company holds 450000 in cash, securities and receivables, and its annual operating expenses are 1800000. Step 1: daily expenses = 1,800,000 / 365 ≈ 4,931.51. Step 2: 450,000 / 4,931.51 = 91.25. The defensive interval ratio is 91.25 days, about three months of spending covered without new sales. With a 360-day year the answer would be exactly 90.

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Common mistakes

  • Using monthly expenses in the annual box, which gives an answer about twelve times too large.
  • Including inventory or fixed assets in liquid assets; only cash, securities and receivables belong.
  • Including depreciation and other non-cash charges in expenses, which understates the number of days.
  • Counting doubtful receivables at full value when some may never be collected.
  • Comparing a 365-day result with a 360-day one from another source without matching the days setting.

Sources

About this calculator

The defensive interval ratio (DIR) divides liquid, "defensive" assets — cash, marketable securities, and receivables — by average daily operating expenses: DIR = Defensive Assets ÷ (Annual Operating Expenses ÷ days in the year), where you enter the day-count basis — 365 if you leave it blank, or 360 if you follow that banking convention. The result is expressed in days: how long a company could keep paying its bills using only assets that are already cash or close to it, if every other source of incoming cash suddenly stopped.

It's especially useful for evaluating companies with volatile or seasonal revenue, or in distress analysis, because unlike the current ratio it doesn't rely on inventory that may be slow to convert to cash. A DIR of 90 days, for example, tells a lender or investor the company has roughly a quarter's worth of runway before it would need new financing or sales.

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Comments (1)

  • Editorial team

    Not every asset in the numerator turns into cash at the same speed. Receivables only become cash after customers pay, so a company holding mostly receivables has a shorter real runway than the figure suggests. Run the tool twice, once with cash and securities alone and once with receivables added, to get a cautious and a generous reading. What mix of assets does the business you are looking at hold?

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