Gross Margin Return On Investment - GMROI
Categories: Accounting, Investing, Metrics
You run the gift shop at the Museum of Toll Booths and Traffic Cones. You want to measure your ability to turn your inventory (mostly t-shirts with pictures of famous toll booths on them...the one at the Holland Tunnel is especially popular) into profits. So you use the gross margin return on investment.
You derive the figure by taking the gross margin the merchandise generates and dividing that number by the average inventory cost. The higher the number, the better you're doing in terms of generating profit from your inventory.