Calculate how long your business can sustain itself using current assets.
The Defensive Interval Ratio measures how long a company can use its liquid assets to cover its daily operating expenses. It's a key indicator of a company's short-term financial health and liquidity.
The formula for calculating the Defensive Interval Ratio is:
Defensive Interval Ratio = Current Assets / Daily Operating Expenses
Where:
If your current assets total $230,000 and your daily expenditure is $2,191.78, then the Defensive Interval Ratio is:
Defensive Interval Ratio = 230,000 / 2,191.78 = 105 Days
This means the business can sustain itself for approximately 105 days using its current assets.