Quick Definition

Measures the number of days a company can continue operating before it runs out of cash.

There's More to Financial Analysis Than You Think...

The Financial Analysis Success Kit can help!

Why you should take a look at the Financial Analysis Success Kit:

We've combined all our highly popular financial analysis tools into one mega-financial-analysis-kit that will save you hundreds of dollars if purchased separately. The kit contains 9 files packed with the most important financial ratio analysis tools you can find to help rocket your way to mastering financial analysis. The kit includes:

  1. The eBook "Learn Ratio Analysis In Minutes"

  2. The Learn Financial Ratio Analysis Excel Spreadsheet (2 versions!)

  3. A BONUS eBook..."Key Financial Statement Terms"

  4. Another HUGE BONUS...Five-Part Financial Ratio Cheat Sheet Series

The result? You get all these professionally created tools for a great low price.

Learn more on our product page:

Click the button to learn more about the Financial Analysis Success Kit

 

Click to take a closer look at the Financial Analysis Success Kit Click the button to learn more about the Financial Analysis Success Kit

Basic Defense Interval Formula

Explanation of Basic Defense Interval

The Basic Defense Interval is called many things; BDI, Defensive Interval Ratio (DIR) and Defensive Interval Period (DIP). The Basic Defense Interval measures the number of days a company can continue paying for its cash expenses without any additional funding.

This ratio avoids using Cost of Goods Sold as an expense, since this is not a cash expense. A similar ratio that does use Cost of Goods Sold is the Expense Coverage Days.

Importance of Basic Defense Interval

The greater the number of days that is calculated from the Basic Defense Interval, the longer the company can keep paying its cash expenses and continue doing business. This ratio should be compared to other companies in the same industry, as well as compared to industry averages.

A company’s Operating Expenses should be the largest component of the expenses used by this ratio. If this is not the case, more investigation will need to be done to find out why.