GMROI Calculator
See how much gross profit every 1 invested in stock brings back.
- Gross margin
- $50,000.00
- Gross margin %
- 41.67%
- Inventory turnover
- 2.8×
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How to use the GMROI calculator
- Enter net sales and cost of goods sold for a period, usually a year.
- Enter the average value of stock you held at cost: (starting + ending) ÷ 2, or an average of monthly counts.
- A GMROI above 1 means stock earns more than it costs; compare it across products or categories.
GMROI formula
Use the same period for revenue, cost of goods and inventory. Annual figures are standard.
Example
A shop sold 120,000 with 70,000 cost of goods and held 25,000 of stock on average. Gross margin is 50,000 (41.7%), so GMROI is 50,000 ÷ 25,000 = 2.0. Every 1 in stock returned 2 in gross profit, with stock turning 2.8 times a year.
What is a good GMROI?
Above 1 means you earn more gross profit than you spend on stock. Many retailers aim for 3 or more. Low-margin products need high turnover to reach a good GMROI, and slow sellers need high margins.
How to improve GMROI
Raise margin through pricing or better buying, sell stock faster, and cut slow-moving inventory that ties up cash. GMROI shows which products deserve more shelf space and cash.
Frequently asked questions
What does GMROI stand for?
Gross margin return on inventory investment.
How do I calculate average inventory?
Add starting and ending inventory at cost and divide by 2, or average your monthly stock values.
Is a GMROI below 1 bad?
Yes, it usually means the product earns less gross profit than the cash it ties up.
How is GMROI different from margin?
Margin looks at profit per sale; GMROI also counts how much stock you needed to earn it.
Can I use GMROI per product?
Yes. It works best for comparing products, categories or suppliers over the same period.
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