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    GMROI

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    limaquica
    The document provides an explanation and example of how to calculate Gross Margin Return on Inventory (GMROI). There are four steps: 1) Calculate gross margin percentage, 2) Calculate average inventory cost, 3) Calculate the sales to inventory ratio by dividing total sales by average inventory, 4) Calculate GMROI by multiplying gross margin percentage by the sales to inventory ratio. The example provides fictional numbers for a Product A and calculates a 48% gross margin and 240% GMROI. GMROI measures inventory productivity and return on inventory investment.

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    GMROI

    Uploaded by

    limaquica
    234 views3 pages
    The document provides an explanation and example of how to calculate Gross Margin Return on Inventory (GMROI). There are four steps: 1) Calculate gross margin percentage, 2) Calculate average inventory cost, 3) Calculate the sales to inventory ratio by dividing total sales by average inventory, 4) Calculate GMROI by multiplying gross margin percentage by the sales to inventory ratio. The example provides fictional numbers for a Product A and calculates a 48% gross margin and 240% GMROI. GMROI measures inventory productivity and return on inventory investment.

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    The document provides an explanation and example of how to calculate Gross Margin Return on Inventory (GMROI). There are four steps: 1) Calculate gross margin percentage, 2) Calculate average inventory cost, 3) Calculate the sales to inventory ratio by dividing total sales by average inventory, 4) Calculate GMROI by multiplying gross margin percentage by the sales to inventory ratio. The example provides fictional numbers for a Product A and calculates a 48% gross margin and 240% GMROI. GMROI measures inventory productivity and return on inventory investment.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    234 views3 pages

    GMROI

    Uploaded by

    limaquica
    The document provides an explanation and example of how to calculate Gross Margin Return on Inventory (GMROI). There are four steps: 1) Calculate gross margin percentage, 2) Calculate average inventory cost, 3) Calculate the sales to inventory ratio by dividing total sales by average inventory, 4) Calculate GMROI by multiplying gross margin percentage by the sales to inventory ratio. The example provides fictional numbers for a Product A and calculates a 48% gross margin and 240% GMROI. GMROI measures inventory productivity and return on inventory investment.

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    GMROI % = gross margin % x (sales divided by average inventory @ cost)

    Therefore, finding GMROI for any item involves four steps. First, calculate your gross margin percentage for the item. Second, figure your average inventory at cost. Third, divide your total sales by your average inventory at cost to get your ratio of sales to inventory investment. Finally, multiply the result of the third step by your gross margin percentage to get GMROI. Lets go through an example to show how it works.

    Step 1: Calculate your gross margin dollars and gross margin percentage
    The formula for calculating gross margin dollars is: Gross Margin = Sales - Cost of Goods Sold For the sake of getting an easy number to work with, say your total sales of Product A were $500,000. Assume you paid $260,000 for the merchandise. That means your gross margin was $240,000 on the Product A merchandise you sold last year ($500,000 $260,000 = $240,000). Since we want to express GMROI as a percentage in this example, we have to express gross margin as a percentage of total sales. To do that, divide your gross margin dollars by your total sales. The result is 48 percent ($240,000 divided by $500,000= 0.48, or 48%).

    Step 2: Calculate your average inventory at cost


    To figure your average inventory for a year, add up your ending inventories (at cost) for every month of that year, plus the ending inventory (at cost) for the previous year. Then, to get the average, divide the total of those inventories by 13, the number of inventories in the sum. Lets assume, again keeping it simple, that the sum of all those ending inventories for Product A (including last years fiscal year-end) was $1,300,000. Then, $1,300,000 divided by 13 = $100,000, your average inventory at cost.

    Step 3: Calculate your sales-to-inventory investment ratio


    You get your sales-to-inventory investment ratio by dividing total sales by average inventory at cost: $500,000 divided by $100,000 = 5. (Dont confuse this figure with inventory turnover rate. Turnover is the ratio of total sales to average inventory at retail,

    or cost of goods sold to average inventory at cost. Inventory turnover is also a useful measure of inventory activity, but not part of the GMROI calculation.)

    Step 4: Calculate the GMROI percentage


    Using our example figures, GMROI = 48% x 5 = 240%. In this example, your gross margin return on (inventory) investment was 240 percent. That means that for each dollar you invested in inventory for Product A last year, you got a 240 percent gross margin return on your inventory investment. Now you have an objective measure of your inventory productivity, and can compare Product A to other merchandise categories in your store. This productivity comparison is the big value of the GMROI tool.

    Read more: http://www.retailowner.com/InventoryProfitsCash/UsingGMROI/tabid/403/Default.asp x#ixzz1ZRnJpOqy

    Escriba sus ventas y los mrgenes previstos - por tienda, por departamento, por proveedor, incluso por grupos de clientes! - and immediately see the GMROI for each one. - Y ver de inmediato el GMROI para cada uno. Quickly compare and contrast the relative productivity of each grouping. Rpidamente comparar y contrastar la productividad relativa de cada grupo. Which ones are providing a good return on your inventory investment? Cules son proporcionar un buen retorno sobre la inversin en inventario? Which ones are lagging behind in productivity? Cules van a la zaga de la productividad?

    Qu pasara si I. ..?" Then, make some changes. Increase margins? Entonces, hacer algunos cambios. Aumentar los mrgenes? GMROI goes up. GMROI va para arriba. Hmmm....Increase turns? Hmmm .... incrementar la rotacin? GMROI really goes up! GMROI realmente va para arriba! Or, increase both, and see what synergy is all about! O bien, aumentar tanto, y ver lo que la sinergia es todo!

    Now, you have a plan. Ahora, usted tiene un plan. You can focus your buying - and your negotiations with your vendors - where you will get the best return on your investment. Puede concretar la compra - y sus negociaciones con sus proveedores - que obtendr el mejor retorno de su inversin.

    La frmula para calcular GMROI Gross Margin Return on Inventory (Investment) Volver margen bruto en el inventario (de inversin) Annual Gross Margin $$ Margen bruto anual de $ $ divided by dividido por Average Inventory @Cost Inventario promedio @ Costo equals es igual GMROI GMROI

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