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Can someone explain GMROI to me? Thanks!

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GMROI stands for “gross margin return on inventory.” This is a quick measurement for determining how quickly a business can turn inventory into cash flow. A GMROI above 1 suggests that a business is selling products for more than it costs to acquire it, and most retailers target a rate of 3 to 4. The GMROI is calculated as gross margin divided by the average inventory cost (GMROI = gross margin / average inventory cost). A rep may have a better comment on how it's used in practice.

What is a Gross Margin Return On Investment - GMROI
A gross margin return on investment (GMROI) is an inventory profitability evaluation ratio that analyzes a firm's ability to turn inventory into cash above the cost of the inventory. It is calculated by dividing the gross margin by the average inventory cost and is used often in the retail industry. GMROI is calculated as:
GMROI = Gross Margin / Average Inventory Cost
GMROI is also know as the gross margin return on inventory investment (GMROII).

Duc Tran

Regenesis pharmaceutical inc

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