GMROII Dollars Calculator
Gross Margin Return On Inventory Invested ($) Calculator Explained:
What is this?
Gross Margin Returned On Inventory Invested (GMROII), generates a number which is expressed as a $. It combines GP% and stock turn to give you an efficiency ratio.
What does this tell me?
This calculator combines stock turn and GP% to determine a ratio. In this calculation it is expressed as a $. The more money you make (the greater the $), generally the better things are. $1 means you invested $1 at the start of the year (or time period) and that $1 generated $1 of GP profit by the end of the year (or time period). $2 means you invested $1 and got $2 of GP back at the end of the year. GMROII became popular when it was discovered large retailers used it to assess their category performance.
Why should I use it?
Because it combines two major measures, how much money you are making (GP$) and how often you make it (Stock Turn).
Caution
GMROII is just one tool at your dispoal. It does not tell you to exit or enter categories or products, but it is a useful point of comparison. It does not tell you how much money you are making, it is simply a ratio. Any decisions are entirely at your own risk.