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Gross Margin Return on Inventory Investment
| We will introduce one more extremely valuable term GMROII - Gross Margin Return on Inventory Investment. Sometimes also referred to as GMROI (Gross Margin Return on Inventory). This combines the important ratios of Gross Profit and Stockturn into the one measure. It is valuable in comparing two different stock lines or in investigating the impact of a change in strategy (such as reducing your price in order to increase your sales). Because of its value in comparisons we will set up a GMROII comparisons page with multiple columns. |
GMROII tells you how much return (in terms of Gross Profit) you are receiving for each dollar of investment in carrying stock. So if you have a GMROII of 128% that means for each $ you have invested in stock you receive $1.28 gross profit in a year. GMROII= Stockturn*GP%.
See also Gross Profit, Markup, Stockturn, GMROII Comparison