Understanding Defensive Interval Ratio

The video tutorial explains the defensive interval ratio (DIR), a liquidity ratio that measures how many days a company can operate without accessing non-current assets. The formula involves dividing liquid assets by daily operating expenses. Examples for two companies illustrate the calculation process. The video emphasizes the importance of DIR in assessing a company's liquidity and highlights factors that may affect its accuracy. The session concludes with a preview of the next topic on liquidity ratios.

What does a higher defensive interval ratio indicate about a company's liquidity position?

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Why is it important to consider events occurring after the balance sheet date when analyzing ratios?

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What factors can distort the defensive interval ratio?

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