GMROI Calculator
Gross margin return on inventory investment (GMROI) tells a retailer how hard its inventory dollars are working: how much gross margin each dollar invested in stock returns. It combines profitability and inventory efficiency in a single figure, which is why merchandisers rely on it to compare categories. Enter your revenue, cost of goods sold, and average inventory valued at cost. This calculator computes gross margin dollars, gross margin percentage, and GMROI, the dollars of margin earned per dollar of inventory.
GMROI formula
Gross margin = net sales - cost of goods sold
Gross margin (%) = (gross margin / net sales) * 100
GMROI = gross margin / average inventory at cost
Gross margin is sales less cost of goods sold. GMROI divides that margin by the average inventory at cost, giving margin dollars per inventory dollar invested.
Using GMROI
- A GMROI above 1.0 means gross margin exceeds the inventory investment.
- Always value inventory at cost, never at retail, for this ratio.
- GMROI combines margin and turnover, so it ranks categories better than either alone.
- Compare GMROI within a sector; norms differ greatly across retail types.
- U.S. Census retail trade data provides sector context for inventory and sales.
GMROI: frequently asked questions
What is GMROI?
GMROI is gross margin return on inventory investment. It measures how many dollars of gross margin a retailer earns for each dollar invested in inventory at cost. It equals gross margin dollars divided by average inventory cost.
How is GMROI calculated?
Divide annual gross margin dollars by the average inventory valued at cost. A GMROI of 3.0 means you earn three dollars of gross margin for every dollar tied up in inventory. Gross margin equals revenue minus cost of goods sold.
What is a good GMROI?
A GMROI above 1.0 means gross margin exceeds the inventory investment, which is generally the baseline for a profitable category. The right target varies widely by retail sector, so compare against your own category norms.
Should inventory be valued at cost or retail?
GMROI uses average inventory at cost, not at retail price, because it measures return on the money actually invested in stock. Mixing cost and retail values would distort the ratio.
How is GMROI different from inventory turnover?
Inventory turnover measures how fast stock sells. GMROI combines margin and turnover into one figure, showing profit generated per dollar of inventory. Two products can have the same turnover but very different GMROI if their margins differ.
Official sources
- U.S. Census Bureau: Monthly Retail Trade and Inventories.
- U.S. Small Business Administration: Manage your finances.
Reviewed by the CalculatorHub team, edited by James Graham, 16 June 2026. See our methodology.