GMROII Dollars Calculator
Gross Margin Return On Inventory Invested ($) Calculator Explained:
(a) 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.
(b) 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 $2 of GP back at the end of the year. GMROII became popular when it was discovered large retailers used it to assess their category performance.
(c) Why should I use it? Because it combines two major measures, how much money you are making (GP$) and how often you make it (Stock Turn).
(d) 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.