GMROI (Gross Margin Return on Investment)
Measure profit return on the money invested in inventory.
About GMROI (Gross Margin Return on Investment)
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.
Formula
GMROI (Gross Margin Return on Investment)
GMROI = (sales x margin%) / average inventory cost
- GMROI
- Dollars of gross profit generated per dollar of inventory
Worked example
With the default values below, GMROI (Gross Margin Return on Investment) returns Annual Gross Margin Dollars of $72,000.00. Change any input above and every figure here is recalculated in your browser.
Inputs used
- Gross marginaccepts 0–100 %
- 40 %
- Average inventory costminimum 0
- 50,000
- Annual salesminimum 0
- 180,000
Results
- Annual Gross Margin Dollars
- $72,000.00
- Inventory Turns
- 3.60
- GMROI
- 1.44
Step by step
- 1Values used
- 2GMROI (Gross Margin Return on Investment)
- 3Annual Gross Margin Dollars= 72,000.00
- 4Inventory Turns= 3.60
- 5GMROI= 1.44
Assumptions and limits
- The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
- In particular, this calculator does not take inflation or tax into account.
- Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
- This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.
How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.
Frequently Asked Questions
How is GMROI (Gross Margin Return on Investment) calculated?
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.
Why does GMROI (Gross Margin Return on Investment) matter?
A margin number alone misses the picture because thin-margin fast-sellers can beat fat-margin slow-sellers, which is exactly what GMROI exposes.
What values do I need to enter?
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.