Question
GMROI is used in the retail industry for calculating profitability of inventory purchases. In other wors, the GMROI formular lets you know how much profit
GMROI is used in the retail industry for calculating profitability of inventory purchases. In other wors, the GMROI formular lets you know how much profit you get from each dollar you invest into inventory.
GMROI =
It is a measurement of the cost of purchasing, transporting, and holding inventory, plus the cost associated with fulfilling customer orders for that inventory.
Why do GMROI benchmark matter? GMROI is one of top key performance indicators (KPIs) in retail. Calculating GMROI is like taking your businesss temperature.
Suppose you own Family Clothing Inc. that has annual revenue of $400,000; COGS for $75,000.
Find the companys GMROI using following information:
| Month | Inventory cost at BOM |
| Jan | $110,000 |
| Feb | $112,000 |
| Mar | $115,000 |
| Apr | $118,000 |
| May | $114,000 |
| Jun | $115,600 |
| Jul | $121,000 |
| Aug | $122,400 |
| Sep | $123,850 |
| Oct | $125,670 |
| Nov | $126,200 |
| Dec | $127,800 |
| EOM Dec | $130,000 |
How to do:
Find Average inventory at cost = (add all 12 BOM + EOM of Dec) / 13
Find GM = Revenue COGS
Find GMROI = $GM / $Average inventory at cost (if you are not sure, look at Retail math book or materials)
Suppose the GMROI you got from your calculation is lower than your competitors, how would you improve your GMROI?
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Audit Security How To Plan Implement And Audit Netsuite Security
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