Online gross margin return on inventory (GMROI) calculator helps you measure the store/organization turn inventory into cash from the inventory cost. So, let’s try our calculator.
Why is GMROI So Important?
GMROI is so important to measurement the how much inventory has gained after covering the inventory cost. If you want to show your inventory success ratio then it can be helpful for you to show that.
How Does Gross Margin Increase Return on Investment?
You can increase gross margin by 2 ways:
- To increase the product price for your customer
- To increase product purchase number (probably you will get a discount/commission for the big deal).
What is Considered A Good GMROI Number/Ratio?
If your GMROI number is 3.2 or upper, then it’s OK. A higher number is more good. But if your GMROI ratio is below 3.2, then it’s a matter of concern.
How To Calculate Gross Margin Return On Investment?
If you want to calculate GMROI manually or want to know that how our online GMROI calculator calculates this percentage, then follow the formula.
Basically, it calculates by following this rules at first divide the Gross Margin percentage by 100% then multiply it with Annual Sales. Then divide Annual Sales by Average Inventory Cost then divide both with 100%.
I think it was hard to understand so look at the below formula it’s so so easy to understand.
GMROI – Gross Margin Return On Investment Formula:
Just follow this easily formula to calculate the percentage.
=((Annual Sales x (Gross Margin ÷ 100%)) ÷ Average Inventory Cost) x 100%
GMROI Formula Example:
Suppose your data is:
- Annual Sales: $1000000
- Gross margin % : 50%
- Average inventory cost: $100000
Now see how we calculate it.
=> (($1000000 x (50% 100%)) ÷ $100000) x 100%
=> (($1000000 x 0.5) ÷ $100000) x 100%
=> ($500,000 ÷ $100000) x 100%
=> 5 x 100%
=> 500%
Calculate GMROI Excel / Spreadsheet:
Are you want to know that how do I calculate gross in Excel or spreadsheet? If your answer is YES then follow the below method.
| A | B | |
| 1 | Annual Sales: | 1000000 |
| 2 | Gross margin % : | 50% |
| 3 | Average inventory cost: | 100000 |
| 4 | GMROI: | Apply the below formula |
Now type the formula on B4 cell:
=((B1 * (B2 / 100)) / B3) * 100
And then select General to Percentage for B4 cell.
