# GMROI Ratio Calculator

**Gross Margin Return On Inventory (GMROI) Ratio Calculator Explained:**

**(a) What is this?** The Gross Margin Return On Inventory (GMROI) ratio tells you how many times the Gross Margin is earned from the inventory investment.

**(b) What does this tell me?** The GMROI calculations assist buyers evaluating whether a sufficient gross margin is earned by the products purchased, compared to the investment in inventory required to generate the Gross Margin $. The more money (the higher the ratio) you make, the better it is. You can use it to compare products within a category, and you can use it to compare categories. This ratio is presented as a single number which will differ significantly by product and by category.

Note that the GMROI and GMROII are NOT the same equation and are used to measure slightly different things.

**(c) Why should I use it?** To assess whether the ratio is growing, static or declining. Note that the GMROI ratio excludes Stock Turn information. A growing GMROI number is the desired outcome.

**(d) Caution:** GMROI is just one tool at your disposal, there are other GMROI/GMROII tools. It does not tell you what to do. Any decisions you make are at your own risk.