Summary
This article walks through what GMROI is and how it is calculated.
Applies to
All Items in StockIQ
Process
GMROI, or Gross Margin Return on Investment is a measure of how much return your inventory is generating for you.
It is calculated with the following formula:
GMROI = Gross Profit / Average Inventory Value
Most commonly, GMROI is expressed as an annualized number, so the Gross Profit is your yearly or last-12-months revenue.
As an example, If on a given product you made $50,000 in revenue, but required only $10,000 in average inventory to achieve that, your GMROI is $50,000 / $10,000 = 5.0, meaning you earned about $5 for every $1 you invested in inventory.
GMROI associated with other periods is useful as well. In the StockIQ Sales & Margin screens, a Monthly and Weekly GMROI is available, based off an inventory snapshot taken at the beginning of the month. This allows you to show what return you generated off the inventory you had on hand that month, e.g:
Monthly GMROI = Monthly Revenue / On Hand Balance At Beginning of Month
And this allows you to generate a "Return on Stock" report for individual items or product groups by looking at the product hierarchy.