GMROI Calculator (Gross Margin Return on Inventory Investment)
How much gross margin each unit of money tied up in stock earns in a period, with the gross margin, its percentage of sales and the stock turns behind it.
Results
What this tool does
GMROI joins two things retailers watch separately: how much margin they make on each sale and how fast the stock sells. It is the gross margin divided by the average inventory valued at cost, and it equals the margin over cost multiplied by the stock turns — so a slow seller needs a fat margin, and a thin-margin product needs fast turns. Above 1 the stock earns back more in gross margin than it cost to hold, before overheads; what counts as good varies a lot by sector, from groceries to jewellery. Use the same period for sales and for the average stock.
Formula
GMROI = (sales − COGS) ÷ average inventory at cost · = (margin ÷ COGS) × turns
Variables
| Symbol | Meaning | Unit |
|---|---|---|
ns | Net sales for the period | — |
cg | Cost of goods sold | — |
ai | Average inventory, valued at cost | — |
GR | GMROI (gross margin earned per unit of stock held) | — |
GM | Gross margin | — |
GP | Gross margin as a share of sales | % |
TR | Stock turns in the period | — |
Worked example
- Net sales for the period500,000
- Cost of goods sold320,000
- Average inventory, valued at cost80,000
- GMROI (gross margin earned per unit of stock held)2.25
- Gross margin180,000
- Gross margin as a share of sales36.0 %
- Stock turns in the period4.00
Limitations
- The tool works with whatever currency you use for the inputs; it does not convert between currencies.
- The default values are typical reference figures, not measurements of your situation. Replace them with your own data whenever you have it.