Inventory
GMROI calculator.
Enter net sales, cost of goods sold and your beginning and ending inventory at cost. See how many dollars of gross profit each dollar of stock earns.
GMROI = gross profit / average inventory cost. With $250,000.00 of sales, $150,000.00 of cost of goods and $45,000.00 of average inventory, gross profit is $100,000.00 and GMROI is 2.22: $2.22 of gross profit for every $1.00 of inventory.
Your numbers
Result
Worked example
A store has $250,000.00 of net sales and $150,000.00 of cost of goods sold for the year, so gross profit is $100,000.00 (a 40.00% gross margin). Inventory at cost was $40,000.00 at the start and $50,000.00 at the end, an average of $45,000.00. GMROI = $100,000.00 / $45,000.00 = 2.22. Inventory turns (cost of goods / average inventory) are 3.33. At a target GMROI of 3, the same gross profit would need $33,333.33 of inventory, $11,666.67 less than the store carries.
How it works
GMROI = gross profit / average inventory cost. Gross profit is net sales minus cost of goods sold. Average inventory here is the simple average of your starting and ending inventory at cost; if inventory swings through the year (seasonal stock), average twelve month-end figures instead for a truer number.
A GMROI of 2 means the business earns $2 of gross profit for every $1 invested in inventory. Because GMROI divides by cost, it combines margin and speed: a high-margin item that sits can score lower than a thin-margin item that turns quickly. A GMROI above 1 simply means gross profit exceeds the average cost of the stock; it does not account for rent, wages or other expenses, so it is not net profit.
Compare GMROI across your own categories or across periods, using the same method each time. This page does not publish industry benchmarks.
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Sources
- GMROI Formula: How to Calculate It for Retail (2026) - Shopify (opened 2026-10-08): the GMROI formula (gross profit divided by average inventory cost), gross profit as revenue minus cost of goods sold, and the "GMROI of 2 means $2 per $1 invested" reading.
FAQ
What is the GMROI formula?
GMROI = gross profit / average inventory cost. Gross profit is revenue minus cost of goods sold, and average inventory is measured at cost, not at retail price.
What is a good GMROI?
There is no single number. A GMROI of 1 means gross profit equals the cost of the stock you carried, and anything higher means each inventory dollar earns more than a dollar of gross profit. Compare your own categories and periods rather than a generic benchmark, because it depends heavily on what you sell and how fast it turns.
How is GMROI different from inventory turnover?
Turnover (cost of goods sold / average inventory) measures speed only. GMROI measures gross profit per inventory dollar, so it rewards both speed and margin. This calculator shows both for the same inputs.
Should inventory be at cost or at retail?
At cost. The GMROI formula divides gross profit by average inventory cost, so using retail value will understate the result.
How do I raise GMROI?
Raise gross margin (price, supplier terms), sell stock faster, or carry less inventory for the same sales. The target line shows how much inventory the same gross profit would need at a higher GMROI.