GMROI calculator (gross margin return on inventory)
GMROI links profit to the cash tied up in stock, helping you see which products deserve shelf space.
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How to use it
- Enter net sales, cost of goods sold and average inventory at cost.
- The result appears straight away and updates as you edit.
- Copy the result, or copy a link that keeps the same values to share it.
How it is calculated
Gross margin = sales − cost of goods sold. GMROI = gross margin ÷ average inventory at cost.
Example
Inputs: Net sales = 500,000, Cost of goods sold = 300,000, Average inventory at cost = 80,000. Result: GMROI: 2.5; Gross margin: 200,000.00; Gross margin %: 40%.
Limits and caveats
- Operating expenses are not included, so a value above 1 does not guarantee net profit.
- Use sales, cost and inventory for the same period and the same product or department.
Questions about this tool
What does a GMROI of 2.5 mean?
Every 1 invested in inventory at cost produced 2.5 of gross margin during the period.
What value is acceptable?
Below 1 means gross margin is less than the cash tied up in stock. Many retailers aim for 3 or more a year.
Should I use it per product?
Yes. Working it out per product or department shows which items tie up cash without enough profit.