GMROII % and $ Calculator
Gross Margin Return On Inventory Invested (GMROII) $ and % Explained:
(a) What is this? GMROII expressed as both $ and % figures. GMROII combines GP% and stock turn to give an efficiency ratio.
(b) 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.
(c) 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.
(d) 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.