GMROII % and $ Calculator
Gross Margin Return On Inventory Invested (GMROII) $ and % Explained:
What is this?
GMROII expressed as both $ and % figures. GMROII combines GP% and stock turn to give an efficiency ratio.
What does this tell me?
This calculator combines stock turn and GP to determine a ratio. It tells you how many GP$ you get for each $1 investment a business makes at the start of the year. It can be expressed as a % or $ figure. The more money you make, the better it is. Where the ratio is presented as a dollar number, it means the business invested $1 at the start of the year and this $1.00 invested generated $1.00 of GP profit at the end of the year. Where it is expressed as a %, it means that where the business has invested $1.00 and made $2.00 at the end of the year it has generated a 200% return.
Why should I use it?
To compare GMROII measures and to understand the difference between them. It also helps illustrate the impact of different activities in your store: pricing, ranging, promotions etc and tells you how effectively the business has been at managing these activities.
Caution
GMROII is just one tool at your disposal. 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 a business is making. Any decisions made are at your own risk.