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GMROI Calculator — Gross Margin Return on Investment

Calculate GMROI: gross profit per dollar of inventory. Measure inventory productivity.

Use the GMROI Calculator — Gross Margin Return on Investment

Enter gross margin (or gross profit) and average inventory at cost. GMROI and gross profit per $1 inventory are calculated.

Margin & inventory

Gross margin as % or as $ (sales and gross profit). Average inventory at cost.

Results

GMROI
4.00
Gross profit per $1 inventory
$4

GMROI = Gross profit ÷ Average inventory (at cost). Higher = better inventory productivity. Use average inventory over the period.

What this metric means

GMROI measures how productively you use inventory to generate gross profit. It helps compare categories, suppliers, and periods.

How to calculate it

GMROI = Gross profit ÷ Average inventory cost. Gross profit = Sales × Gross margin %, or use gross profit directly from the P&L.

How to improve the metric

Improve margin (pricing, mix, cost); reduce average inventory (faster turns, better forecasting); or shift mix toward higher-margin, faster-moving items.

Common mistakes

Using retail value for inventory instead of cost; using point-in-time inventory instead of average; or mixing time periods for profit and inventory.

How to interpret your result

Higher GMROI = better inventory productivity. Use with turnover and margin to get the full picture. Low GMROI may mean overstock or weak margins.

FAQs

What is GMROI?▾
GMROI = Gross profit ÷ Average inventory (at cost). It shows how much gross profit you earn per dollar invested in inventory. Higher is better.
Why use inventory at cost?▾
Inventory is carried at cost on the balance sheet. Using cost keeps numerator (gross profit) and denominator (inventory) on the same basis.
What's a good GMROI?▾
It varies by category and sector. Compare to your own history and to category benchmarks. GMROI above 1 means you earn more than $1 gross profit per $1 inventory.
Annual or period?▾
Use the same period for gross profit and average inventory (e.g. annual). Average inventory = (beginning + ending) ÷ 2 for the period.

Related tools

Browse all calculators on NetGrow.

NetGrow

GMROI Calculator — Gross Margin Return on Investment

Calculate GMROI: gross profit per dollar of inventory. Measure inventory productivity.

Use the GMROI Calculator — Gross Margin Return on Investment

Enter gross margin (or gross profit) and average inventory at cost. GMROI and gross profit per $1 inventory are calculated.

Margin & inventory

Gross margin as % or as $ (sales and gross profit). Average inventory at cost.

Results

GMROI
4.00
Gross profit per $1 inventory
$4

GMROI = Gross profit ÷ Average inventory (at cost). Higher = better inventory productivity. Use average inventory over the period.

What this metric means

GMROI measures how productively you use inventory to generate gross profit. It helps compare categories, suppliers, and periods.

How to calculate it

GMROI = Gross profit ÷ Average inventory cost. Gross profit = Sales × Gross margin %, or use gross profit directly from the P&L.

How to improve the metric

Improve margin (pricing, mix, cost); reduce average inventory (faster turns, better forecasting); or shift mix toward higher-margin, faster-moving items.

Common mistakes

Using retail value for inventory instead of cost; using point-in-time inventory instead of average; or mixing time periods for profit and inventory.

How to interpret your result

Higher GMROI = better inventory productivity. Use with turnover and margin to get the full picture. Low GMROI may mean overstock or weak margins.

FAQs

What is GMROI?▾
GMROI = Gross profit ÷ Average inventory (at cost). It shows how much gross profit you earn per dollar invested in inventory. Higher is better.
Why use inventory at cost?▾
Inventory is carried at cost on the balance sheet. Using cost keeps numerator (gross profit) and denominator (inventory) on the same basis.
What's a good GMROI?▾
It varies by category and sector. Compare to your own history and to category benchmarks. GMROI above 1 means you earn more than $1 gross profit per $1 inventory.
Annual or period?▾
Use the same period for gross profit and average inventory (e.g. annual). Average inventory = (beginning + ending) ÷ 2 for the period.

Related tools

Browse all calculators on NetGrow.