Measure profit return on the money invested in inventory.
GMROI multiplies sales by the margin rate to get gross profit dollars, then compares that profit against the inventory that funded it. A margin number alone misses the picture because thin-margin fast-sellers can beat fat-margin slow-sellers, which is exactly what GMROI exposes.
GMROI (Gross Margin Return on Investment)
GMROI = (sales x margin%) / average inventory cost
GMROI = (sales x margin%) / average inventory cost GMROI multiplies sales by the margin rate to get gross profit dollars, then compares that profit against the inventory that funded it.
A margin number alone misses the picture because thin-margin fast-sellers can beat fat-margin slow-sellers, which is exactly what GMROI exposes.
This calculator takes 3 inputs: Gross margin, Average inventory cost, Annual sales. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.