About

The Defensive Interval Ratio (DIR), often called the Basic Defense Interval (BDI), is a rigorous liquidity metric that determines how many days a company can continue to pay its operating expenses using only its existing liquid assets. Unlike the Current Ratio, which includes illiquid inventory, the DIR focuses purely on cash, marketable securities, and receivables.

This tool is essential for investors and CFOs assessing financial durability during revenue downturns. It answers the question: "If sales stopped today, how long until the lights go out?" A higher ratio indicates a stronger buffer against financial distress.

Formulas

The ratio divides the total "Defensive Assets" by the estimated daily cash operating expenses. Non-cash charges like depreciation are subtracted from expenses to isolate actual cash outflow.

DIR = Cash + Securities + Receivables(AnnualOpsExp − NonCashCharges) ÷ 365

Where:

AnnualOpsExp = Operating Expenses + Cost of Sales + Taxes
NonCashCharges = Depreciation + Amortization

Reference Data

DIR Range (Days)	Risk Classification	Interpretation
< 30 Days	Critical (Red)	Immediate liquidity crisis risk. Reliant on daily cash flow.
30 - 90 Days	Moderate (Yellow)	Standard operational buffer. Vulnerable to prolonged shocks.
> 90 Days	Safe (Green)	Strong defensive position. Capable of surviving quarterly downturns.
> 365 Days	Conservative	Extremely high liquidity. May indicate inefficient cash deployment.

Frequently Asked Questions

Inventory is not considered a "quick" or defensive asset because it requires a sale to convert to cash. In a crisis where sales drop, inventory becomes illiquid, making it unreliable for paying immediate bills.

These are accounting expenses like Depreciation and Amortization that reduce reported income but do not involve an actual outflow of cash. They must be added back (or subtracted from expenses) to find the true daily cash burn.

The Quick Ratio measures assets vs. liabilities (Coverage). The DIR measures assets vs. time (Endurance). DIR outputs "Days", which is often more intuitive for risk management.

No. While safe, a DIR of 400+ days might suggest the company is hoarding cash rather than investing in growth, R&D, or dividends.