What is Defensive Internal Ratio?
Defensive Internal Ratios is otherwise called as Basic Defensive Interval Ratio and Internal Measure Ratio. This ratio is calculated to find out whether liquid assets are sufficient to meet daily cash requirements for operating expenses of the firm. Well, how to calculate defensive internal ratio?
Formula to find out Defensive Internal Ratio
The following formulae are used to calculate Defensive Interval Ratio.
Defensive Internal Ratio (or) Interval Measure Ratio = Quick or Liquid Assets / Average Daily Cash operating Expenses
Defensive Internal Ratio (or) Interval Measure Ratio = Total Defensive Assets / Projected Daily Operating Expenses
Average Daily Expenses = (Cost of Goods Sold + Office and Administration Expenses+ Selling and Distribution Expenses (Less Depreciation and Non-Cash Expenses)) / No. of Days in a year