GMROI Calculator

Gross margin return on inventory from margin and turns.

What it does

GMROI links profit with stock speed. A 40 percent margin turning four times returns $1.60 gross per $1 inventory per year. High margin with slow turns can match low margin with fast turns.

The tool above takes margin percent and turns and returns GMROI, margin per thousand sales, and grade. The defaults 40 and 4 match the worked example, so the page opens showing 1.6x.

GMROI is margin over 100 times turns. Margin per thousand multiplies margin fraction by 1000. Grades here read over 3 excellent, 1 to 3 average, below 1 needs work.

Use this by category to rank assortments, not just house average. Markdowns cut margin, overstocks cut turns, both cut GMROI. Service and stockout costs sit outside.

This page shows the formula, one full hand checked example at 40 percent with 4 turns, a reference table, and practice checks that run through the tool.

How to use

1. Type gross margin percent.
2. Type inventory turns per year.
3. Read GMROI as multiple.
4. Read Margin per 1000 sales in dollars.
5. Read Grade against 3x and 1x lines.
6. Compare categories, not just house.

Formula

margin

Gross margin percent.

turns

COGS over average inventory.

GMROI

Gross dollars per inventory dollar.

Turns use cost basis consistently. Mixing retail turns with cost margin skews results.

Worked example

Reference table

Limits

• Gross only. Labor, rent, and shrink sit outside.
• Cost basis turns assumed.
• Single period snapshot. Seasons swing.
• Grade lines 3x/1x are guideposts here.

Common mistakes

• Mixing retail turns with cost margin.
• Averaging GMROIs without weighting.
• Chasing turns with stockouts.
• Ignoring markdown drag on margin.
• Reading 1.6x as 160 percent profit (it is return, not margin).

Try it yourself

Quick checks. Answers sit tucked under each question.

Questions

Sources

• SBA: Fund your business
• SCORE: Business mentoring

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