Enter the total gross profit and the average inventory cost into the calculator to determine the GMROI, known as the gross margin return on investment.

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## GMROI Formula

The following formula is used to calculate the GMROI.

GMROI = GP / AIC *100

- Where GMROI is the gross margin return on investment (%)
- GP is the gross profit ($)
- AIC is the average inventory cost ($)

To calculate GMROI, divide the gross profit by the average inventory cost, then multiply by 100.

## GMROI Definition

GMROI is defined as the gross margin return on an investment over a given period of time.

## GMROI Example

How to calculate the GMROI?

**First, determine the gross profit.**Calculate the gross profit after expenses of the business or sector. For this example, we will say this is $50.00

**Next, determine the average cost of inventory.**Calculate the average cost of the inventory being used to generate profit. For this example, we will say this is $25.00.

**Finally, calculate the GMROI.**Using the formula, we find the GMROI to be (50/25)*100 = 200%.

## FAQ

**What is GMROI?**

GMROI stands for the gross margin return on investment. It’s a measure of a business’s ability to turn inventory into profit. The higher the GMROI the higher the profitability.