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GMROI Calculator (Gross Margin Return on Investment)

LAST UPDATE: September 24th, 2020

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Definition – What is GMROI (Gross Margin Return on Investment)?

GMROI measures an organization’s ability to turn inventory into cash in relation to the cost of the inventory.

Formula – How to calculate GMROI

GMROI = (Gross Margin $ / Average Inventory Cost) x 100%

GMROI = ((Annual Sales x (Gross Margin / 100%)) / Average Inventory Cost) x 100%

Example

A store has a revenue of $500,000, gross margin of 30%, and average inventory cost of $100,000.

GMROI = (($500,000 x (30% / 100%)) / $100,000) x 100% = (($500,000 x 0.3) / $100,000) x 100% = ($150,000 / $100,000) x 100% = 1.5 x 100% = 150%

Therefore, this store has a GMROI of 150%.

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