Defensive Interval Ratio

The defensive interval ratio is a financial metric that measures a company's ability to meet its operating expenses with its cash and cash equivalents. It is calculated by dividing a company's cash and cash equivalents by its annual operating expenses.

A high defensive interval ratio indicates that a company has a strong liquidity position and is less likely to experience a cash crunch. A low defensive interval ratio, on the other hand, suggests that a company may have difficulty meeting its operating expenses if its cash flow is interrupted.

The defensive interval ratio is a useful tool for investors to assess a company's financial health. A company with a high defensive interval ratio is less likely to default on its debt or go bankrupt. This makes it a more attractive investment than a company with a low defensive interval ratio.

The defensive interval ratio is also a useful tool for managers to assess their company's liquidity position. A company with a high defensive interval ratio is less likely to experience a cash crunch, which can give managers more time to take corrective action if necessary.

The defensive interval ratio is calculated by dividing a company's cash and cash equivalents by its annual operating expenses. Cash and cash equivalents include cash on hand, money market funds, and short-term investments. Annual operating expenses include all costs incurred in the normal course of business, such as salaries, rent, and utilities.

The defensive interval ratio is a simple but effective tool for assessing a company's liquidity position. A high defensive interval ratio indicates that a company is well-positioned to meet its operating expenses with its cash and cash equivalents. A low defensive interval ratio, on the other hand, suggests that a company may have difficulty meeting its operating expenses if its cash flow is interrupted.

The defensive interval ratio is a valuable tool for investors and managers alike. It can help investors identify companies with strong liquidity positions and managers assess their company's ability to meet its operating expenses.