The Cash Conversion Cycle Formula is an important metric for businesses to measure the efficiency of their cash flow. It is a measure of the time it takes for a business to convert its investments in inventory and other resources into cash from sales. This metric is also known as the operating cycle or the net operating cycle. The formula for calculating the Cash Conversion Cycle is: Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) – Days Payable Outstanding (DPO). DIO is the average number of days it takes to sell inventory. DSO is the average number of days it takes to collect payments from customers. DPO is the average number of days it takes to pay suppliers. By calculating the Cash Conversion Cycle, businesses can get a better understanding of how quickly they are able to convert their investments into cash. This helps them to better manage their cash flow and ensure that they have enough liquidity to meet their financial obligations.