We will introduce one more extremely valuable term GMROII - Gross Margin
Return on Inventory Investment. Sometimes also referred to as GMROI
(Gross Margin Return on Inventory). This combines the important ratios of
Gross Profit and
Stockturn into the one measure. It is valuable in
comparing two different stock lines or in investigating the impact of a
change in strategy (such as reducing your price in order to increase your
sales). Because of its value in comparisons we will set up a GMROII
comparisons page with multiple columns.
GMROII tells you how much return (in terms of Gross Profit) you are
receiving for each dollar of investment in carrying stock. So if you have
a GMROII of 128% that means for each $ you have invested in stock you
receive $1.28 gross profit in a year.