How the Defensive Interval Ratio is calculated
The Defensive Interval Ratio (DIR) — also called the defensive interval period — is a liquidity ratio that answers a simple question: if a company's revenue stopped tomorrow, how many days could it keep paying its operating expenses using only the assets it could turn into cash almost immediately? It compares a company's most liquid ("defensive") assets against the cash it burns each day, so the result comes out in days rather than dollars or a percentage.
The formula
Defensive Interval Ratio = (Cash + Marketable Securities + Net Receivables) ÷ Daily Operating Expenses
Daily operating expenses are not simply the annual expense total divided by 365 — non-cash charges have to be stripped out first, because they never actually leave the bank account:
Daily Operating Expenses = (Annual Operating Expenses − Depreciation & Amortization) ÷ 365
Worked example
Take $150,000 of cash, $50,000 of marketable securities, and $100,000 of net receivables — $300,000 of defensive assets in total. Annual operating expenses are $1,200,000, of which $80,000 is depreciation and amortization, leaving $1,120,000 of cash operating expenses. Divided by 365, that is about $3,068 per day. $300,000 ÷ $3,068 ≈ 97.8 days, or roughly 3.2 months, of coverage before those defensive assets would run out.
What counts as a defensive asset (and what doesn't)
- Included: cash and cash equivalents, short-term marketable securities that can be sold quickly, and net accounts receivable (money already owed to the company).
- Excluded: inventory and prepaid expenses. Both are "current assets" on a balance sheet, but neither converts to spendable cash as quickly or as reliably as the three defensive assets above.
- Non-cash charges removed from expenses: depreciation and amortization reduce reported profit but don't require a cash payment, so they are subtracted out before finding a daily cash burn rate.
Reading the ratio
There is no single regulatory or accounting-standard cutoff for a "good" Defensive Interval Ratio — appropriate coverage differs by industry, seasonality, and how easily a company can raise cash elsewhere. As a general, widely used reference point: a DIR under roughly 30 days suggests a thin liquidity buffer, 30 to 90 days is often read as a moderate buffer, and above 90 days is typically seen as a comparatively strong buffer. The most useful comparison is usually a company's own DIR over time and against close industry peers, not a fixed universal threshold. This calculator performs the arithmetic only — it is not financial or investment advice.