The cash conversion cycle is often calculated as days inventory outstanding plus days sales outstanding minus days payables outstanding. It estimates how long cash is tied up in operations before it comes back. A shorter cycle means the business needs less working capital to operate.
Seasonal businesses can have very long cycles. A farm may buy inputs in spring, hold inventory after harvest, and collect months later, which is why operating loans are common in agriculture. Shortening the cycle through faster billing, better payment terms, or inventory decisions frees cash without new financing.