PALLAS / CALCULATOR
GMROI Calculator
Calculate gross margin return on inventory investment: how much gross margin your average inventory investment generated during the period.
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Method & formula
GMROI compares gross margin with the average amount invested in inventory at cost. Gross margin is net sales minus COGS; average inventory is the mean of beginning and ending inventory.
- Gross margin amount = net sales − COGS
- Average inventory = (beginning inventory + ending inventory) ÷ 2
- GMROI = gross margin amount ÷ average inventory
Example
Net sales of 360,000 and COGS of 240,000 gives gross margin of 120,000. With average inventory of 60,000, GMROI is 2.0×.
FAQ
What does a GMROI of 2 mean?
It means the business generated two units of gross margin for each one unit of average inventory investment during the period.
Can GMROI be negative?
Yes. If COGS is higher than net sales, gross margin is negative and GMROI will be negative as well.