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.
- ROI Calculator – Return on Investment
- Total Return Calculator
- Real Return Calculator
- Average Return on Investment Calculator
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 ($)
- AIC is the average inventory cost ($)
GMROI is defined as the gross margin return on an investment over a given period of time.
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%.
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.