Question

If an item generates $500 in gross margin and the average inventory investment for that item is $200, what is the GMROI?

Accepted Answer

The Gross Margin Return on Investment (GMROI) is 2.5. To calculate this, you divide the gross margin—the profit earned from selling an item after subtracting the cost of the goods—by the average inventory investment, which represents the typical amount of money tied up in stock over a specific period. In this case, dividing $500 by $200 yields 2.5, meaning that for every dollar invested in inventory, the business earns $2.50 in gross profit. Think of GMROI as a measure of efficiency; it tells you how much &#x27;bang for your buck&#x27; your inventory provides, similar to how a high-yield savings account tells you how much profit your original deposit can generate.

If an item generates $500 in gross margin and the average inventory investment for that item is $200, what is the GMROI?

The Gross Margin Return on Investment (GMROI) is 2.5. To calculate this, you divide the gross margin—the profit earned from selling an item after subtracting the cost of the goods—by the average inv....

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If an item generates $500 in gross margin and the average inventory investment for that item is $200, what is the GMROI?

The Gross Margin Return on Investment (GMROI) is 2.5. To calculate this, you divide the gross margin—the profit earned from selling an item after subtracting the cost of the goods—by the average inv....

Community Answers