# GMROI Calculator

## Gross Margin Return on Investment Calculator:

Are you looking to maximize your profitability and make informed decisions about your inventory management? Look no further! Our GMROI (Gross Margin Return on Investment) Calculator is here to help you analyze and optimize your inventory performance.

Ergonomic Office Chair Home Office Desk Chair with Lumbar Support

The chair I use in my home office. A good balance of budget friendly price and quality. And my 18 month old loves looking in the reflective surface on the back, so there's that.

### GMROI metric is a powerful tool

The GMROI metric is a powerful tool used by retailers and wholesalers to measure the profitability of their inventory investment. It considers both the gross margin and the investment in inventory to determine how effectively your inventory generates profit.

## Formula for Calculating GMROI

The formula for calculating GMROI is:

GMROI = (Gross Margin / Average Inventory Cost) × 100

Where:

• Average Inventory Cost is the average cost of inventory during a specific period, typically the average of the beginning and ending inventory costs.

The GMROI formula calculates the gross margin generated by each dollar invested in inventory. Multiplying the result by 100 converts it into a percentage.

To use the formula, you would need the following information:

• Total sales revenue
• Cost of goods sold (COGS)
• Beginning inventory cost
• Ending inventory cost

#### Here’s an example calculation:

Suppose the total sales revenue is \$100,000, COGS is \$60,000, beginning inventory cost is \$20,000, and ending inventory cost is \$25,000.

First, calculate the Gross Margin: Gross Margin = Total Sales Revenue – COGS Gross Margin = \$100,000 – \$60,000 Gross Margin = \$40,000

Next, calculate the Average Inventory Cost: Average Inventory Cost = (Beginning Inventory Cost + Ending Inventory Cost) / 2 Average Inventory Cost = (\$20,000 + \$25,000) / 2 Average Inventory Cost = \$22,500

Finally, calculate the GMROI: GMROI = (Gross Margin / Average Inventory Cost) × 100 GMROI = (\$40,000 / \$22,500) × 100 GMROI ≈ 177.78

Therefore, the GMROI for this example is approximately 177.78%.

## How our GMROI Calculator works:

### Gross Margin Calculation:

• Input the total sales revenue generated by a specific product or a group of products over a defined period.
• Enter the cost of goods sold (COGS) for the same products during the same period.
• Our calculator will automatically calculate the gross margin by subtracting the COGS from the sales revenue.

### Inventory Investment Calculation:

• Provide the average inventory value during the defined period.
• This includes the cost of purchasing or producing the inventory and any additional costs such as storage, insurance, or transportation.
• Our calculator will compute the inventory investment by multiplying the average inventory value by the number of periods (e.g., months) analyzed.

### GMROI Calculation:

• Once you have the gross margin and inventory investment values, divide the gross margin by the inventory investment.
• The GMROI result will indicate the number of dollars in gross margin you’re generating for every dollar invested in inventory.
• A higher GMROI indicates a more profitable use of inventory.

## Key Features of our Calculator:

### Easy-to-use interface:

Our calculator is designed to input the necessary data and obtain accurate results.

### Quick calculations:

With just a few clicks, our calculator will swiftly perform all the required calculations, saving you time and effort.

### Clear and comprehensive results:

The GMROI result will be displayed prominently, allowing you to assess the profitability of your inventory investment at a glance.

### Flexible analysis:

Our calculator enables you to evaluate GMROI for individual products or product groups, allowing you to focus on specific inventory areas.

### Decision-making support:

Armed with GMROI insights, you can make informed decisions about inventory replenishment, pricing strategies, product assortment, and overall inventory management.