What is this?
Gross profit earned for each rupee invested in inventory.
Formula
Gross Profit / Average Inventory Cost
Required inputs
- Gross profit
- Average inventory cost
Free Tools Inventory
GMROI Calculator
Gross profit returned on average inventory cost.
Worked example
₹40,000 profit / ₹30,000 average cost = 1.33 GMROI.
How to interpret it
Compare categories using the same period and inventory valuation method.
Common mistake
Do not use sales instead of gross profit.
When to use it
Prioritise products that generate profit from limited stock capital.