Net Margin Return On Inventory Invested (NMROII)
Net Margin Return On Inventory Invested (NMROII) Calculator Explained::
(a) What is this? NMROII, expressed in $ and as a %, combines NP and stock turn to give you an efficiency ratio
(b) What does it tell me? Similar to GMROII, NMROII considers the Net Margin rather than the Gross Margin. This calculator combines stock turn and NP to determine a ratio. It tells you how many NP$ you get for each $1 investment you make at the start of the year. It can be a expressed as a percentage or $ figure. The more money you make the better it is. You can use it to compare products in a category, and you can use it to compare categories. Where the ratio is presented as a dollar number, it means you invested $1 at the start of the year and this $1.00 investment generated $1.00 of NP profit at the end of the year. Where it says $2.00, this means you invested $1.00 at the start of the year and it made $2 of NP Profit. Where it is expressed a %, it means that where you invested $1.00 at the start of the year and it generated 100% return, it made $1.00. A 200% return means the $1.00 investment made you $2.00 at the end of the year. A 300% return means the $1.00 investment made $3.00, and so on.
(c) Why should I use it? This calculator helps you manage the different activities in your store, pricing, range, promotions etc and tells you how effective you have been at doing these activities.
(d) Caution: You need to read this disclaimer attached to the spreadsheet. NMROII 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's other flaw is that it does not tell you how much money you are making. It is simply a ratio. Use it at your own risk.