defensive interval ratio Definition | Business Dictionaries from AllBusiness.com
Facebook Twitter Google+ You Tube RSS Feed

Business Glossary

SEARCH THE BUSINESS GLOSSARY

Business Definition for: defensive interval ratio
defensive interval ratio

liquidity ratio revealing the ability of the business to meet its current debts. It indicates the period of time the entity can operate on its current liquid assets without needing revenues from next period's sources. The ratio equals defensive assets (cash, marketable securities, and receivables) divided by projected daily operational expenditures less noncash charges. Projected daily operational expenditures are determined by dividing cost of goods sold plus operating expenses and other ordinary cash expenses by 360. Assume cash of $30,000, marketable securities of $38,000, receivables of $46,000, projected daily expenditures of $450,000, and noncash charges of $20,000. The ratio equals:

1001013406-01

defensive interval ratio

ratio showing how long a company can operate on its current liquid assets without having to rely on additional revenues. The ratio divides cash and equivalents, marketable securities, and accounts receivable (defensive assets) by projected daily operating expenses less noncash charges . The denominator is determined by dividing cost of goods sold plus operating expenses and other ordinary cash expenses by 360.

Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.
Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.

Newsletter

Weekly Roundup

Sign up for our weekly Experts roundup, delivered to your inbox each Saturday morning.

Most Recent From our Experts

AllBusiness Experts

AllBusiness Greatest Hits

;
Close

Real Business Owners, Real Business Advice!

Sign up for practical, real-world solutions from successful business owners delivered to your inbox each Saturday morning. FREE.