GMROI Calculator (Gross Margin Return on Investment)

Free GMROI calculator. Enter gross margin and average inventory cost to find how much gross profit your inventory generates per dollar invested.

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GMROI Calculator (Gross Margin Return on Investment)

See how much gross profit a dollar tied up in inventory is actually generating. No signup required.

By Tibeau De Grauwe, FounderUpdated September 2026

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GMROI (Gross Margin Return on Inventory Investment) measures how much gross profit you earn per dollar of average inventory you carry. Two products can have identical margin percentages and very different GMROI if one turns over twice as fast, tying up capital for half as long.

GMROI Calculator

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GMROI

2.50

Every $1 tied up in inventory generated $2.50 of gross profit

The GMROI formula

GMROI = Gross Margin ÷ Average Inventory Cost (at cost, not retail value). For example, a product line that generates $50,000 in gross margin over a year, carrying an average of $20,000 worth of that inventory at cost, has a GMROI of 2.5 — every dollar tied up in that inventory generated $2.50 of gross profit.

Use average inventory cost, not a single point-in-time snapshot: a common approach is (beginning inventory value + ending inventory value) ÷ 2 for the period you're measuring, valued at cost rather than retail price.

GMROI is most useful as a comparison tool across SKUs, categories, or suppliers, since it combines margin and inventory efficiency into one number a high-margin item that sits on the shelf for months can have a lower GMROI than a thin-margin item that turns over quickly.

See also: the GMROI glossary entry, the ABC analysis tool, the inventory turnover calculator.

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Frequently asked questions

What is the GMROI formula?
GMROI = Gross Margin ÷ Average Inventory Cost, where average inventory cost is valued at cost (not retail price). It measures how much gross profit is generated per dollar of inventory investment.
What is a good GMROI?
A GMROI above 1.0 means the inventory generates more in gross profit than it costs to hold, which is a reasonable minimum bar. What counts as "good" beyond that varies significantly by industry margin structure — retailers often benchmark against category or historical averages rather than a single universal target.
How is GMROI different from inventory turnover?
Inventory turnover measures how fast stock sells (COGS ÷ average inventory), without regard to margin. GMROI incorporates both margin and turnover into one number, which is why two products with identical turnover can have very different GMROI if their margins differ.
Should I use average inventory at cost or retail value for GMROI?
Use cost, not retail value. Using retail value understates GMROI and makes it inconsistent with how gross margin itself is calculated (revenue minus cost of goods sold), since gross margin is a cost-based, not retail-based, figure.