Use the Gross Margin Return On Investment (GMROI) reports to analyze your sales for any 365-day period and display information that helps you analyze your return on investment. GMROI is a calculated number that represents the percent you have at the end of one full year for each dollar of average inventory investment during that year.
GMROI reports help you identify when products that you purchased were sold to customers, and if the time elapsed (turnover) was worth the expense of carrying the products.
For example, you purchase an item for $100 in January and it costs you $10 a month to store it. You sell the item for $150 in August. Your cost is $180, but you collected $150. The GMROI reports provide this information so you can make educated decisions about your purchasing or pricing.
The system handles new products differently for the GMROI calculations and reports. New products are not considered in stock for full year (365 days). After the 365 day mark, the system calculates the date of the items first activity and then expands the sales dollars, gross profit, and cost of goods sold (COGS) to a full year.
If a product was in stock for the first time, and it was only on the system for say 6 months, then the system would double the sales, gross profit, and COGS and keeps the average dollars on hand the same. This process gives a truer picture as to what the GMROI is. This process is also why when the GMROI calculation is completed for a full calender year, then the annual sales figure can be larger than the actual sales figure.
See Also:
Calculating Adjusted Margin Percent
GMROI and Adjusted Margin Percent Example
How the System Calculates Gross Margin Return On Investment (GMROI)