Key Retail Financial Metrics Gross Margin of Investment (GMROI) measures a retailer's ability to convert its total revenue into profit. It can be calcula...
Gross Margin of Investment (GMROI) measures a retailer's ability to convert its total revenue into profit. It can be calculated as:
GMROI = Gross profit / Total revenue
For example, if a retailer's gross profit is 1 million, then its GMROI would be 10%.
Inventory turnover indicates how efficiently a retailer manages its inventory. It is calculated as:
Inventory turnover = Total inventory / Total revenue
For instance, if a retailer has 10 million in total revenue, its inventory turnover would be 10. This means that the retailer sells its inventory 10 times during the year.
A high GMROI and inventory turnover indicate a healthy and efficient retail operation. This allows a retailer to generate more revenue from its sales, while also managing its inventory costs effectively