Find the word definition


Gross Margin Return on Inventory Investment (GMROII) is a ratio in microeconomics that describes a seller's return on every unit of currency spent on inventory. It is one way to determine how profitable the seller's inventory is, and describes the relationship between the profit earned from total sales, and the amount invested in the inventory sold. Generally for a seller, the higher the GMROII the better. Since the inventory is a very widely-ranging factor in a seller's investment in working capital, it is important for the seller to know how much he might expect to gain from it. The GMROII answers the question "for each unit of average inventory held at cost, how many units of currency of gross profit I generated in one year?" GMROII is traditionally calculated by using one year's gross profit against the average of 12 or 13 units of inventory at cost. GMROII may vary depending on which segment we are analyzing (Women Apparel, Toys, Home, Sport Ware, etc.), but a rule of thumb is that a GMROII of typical retailer is above $3.0.