1. What is GMROI?

GMROI (Gross Margin Return on Investment) measures how much gross profit is returned for every dollar invested in inventory. It helps retailers evaluate inventory profitability and make better purchasing decisions.

2. How Does the Calculator Work?

The calculator uses the GMROI formula:

Where:

• \( GM \% \) — Gross Margin Percentage
• \( Inventory\ Turnover \) — Number of times inventory is sold and replaced in a period

Explanation: The formula combines profitability (gross margin) and efficiency (inventory turnover) to assess inventory investment performance.

3. Importance of GMROI Calculation

Details: GMROI helps retailers identify which products generate the best return on inventory investment, optimize stock levels, and improve overall profitability.

4. Using the Calculator

Tips: Enter gross margin percentage and inventory turnover values. Both values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good GMROI value?
A: Generally, a GMROI above 1.0 indicates positive return, but ideal values vary by industry and product category.

Q2: How is GM % calculated?
A: GM % = (Net Sales - Cost of Goods Sold) / Net Sales × 100

Q3: How is inventory turnover calculated?
A: Inventory Turnover = Cost of Goods Sold / Average Inventory

Q4: Why is GMROI important for retailers?
A: It helps identify profitable products, optimize inventory investment, and improve overall business profitability.

Q5: Can GMROI be used for service businesses?
A: GMROI is primarily used for inventory-based businesses, but similar ROI concepts can apply to service investments.