The Cycle Inventory Formula is a mathematical equation used by businesses to determine the optimal amount of inventory that needs to be held at any given time to ensure efficiency and profitability. It works on the basis that having too much or too little inventory can have negative impacts on production, sales and customer service levels. By using the formula, businesses are able to calculate their cycle inventory in order to find the ideal balance between too much and too little inventory. This helps them make smart business decisions in terms of what they need to store, when they need to order more, and how much they should be holding in their warehouses and stores.