The Gross Margin Return on Investment (GMROI) is an inventory profitability evaluation ratio that analyses a firm’s ability to turn inventory into cash above the cost of the inventory. It is calculated by dividing the gross margin by the average inventory cost and is used often in the retail industry.
The GMROI is calculated as: GMROI = Gross Margin / Average Inventory Cost.
The GMROI Report lets you evaluate whether enough gross margin is being earned by the Products purchased, compared to the investment in inventory required to generate those gross margins in dollars. The GMROI report is an important way of measuring the gross profit returned on stock investment.
To generate the GMROI report:
1. In the RPM menu, click Report and then click GMROI Report.
The GMROI Report screen is displayed.
2. Select the required filters.
3. Select the appropriate Report Type.
4. Select the other required fields and specify the Date Range.
5. Select View Report to view the report.
The GMROI report will be generated.
Sample of GMROI Report
The fields displayed in the sample report can vary depending on your selection. The items displayed have been described in the table below.
| Columns | Descriptions |
|---|---|
UPI | The UPI number of the Product. |
Barcode | The barcode number of the Product. |
Supplier Code | The supplier code of the Product. |
Product Name | The name of the Product. |
Qty Sold | The number of items sold within the specified date range. |
Total Sales | The total sales of the Product during the specified date range based on retail cost including GST. |
Total Cost | The total cost of the Product. |
SOH | The current stock on hand |
Stock Turn | The stock turn of the Products measures the operating efficiency of the Business. It indicates the turnover of the business. The stock turn is calculated as: Cost of Goods Sold / Average Stock Value The average stock value is calculated as: Average Stock on Hand × Average Cost where: Average Stock on Hand = Average SOH during the specified date range. Average Cost = Average real cost during the date range. |
GMROI | The GMROI of the Product during the specified date range is calculated as: Gross Profit / Average Stock Value Average stock value is calculated as: Average Stock on Hand × Average Cost where: Average Stock on Hand = Average SOH during the specified date range. Average Cost = Average real cost during the date range. |
