Note: Turn and Earn Index is also commonly referred to as the Turn/Earn Ratio, Turn/Earn Formula, or just as Turn and Earn. Turn and Earn Index As a Method of Inventory ManagementĪs a purchasing manager, accountant, or other key financial role in your company, you may utilize a Turn and Earn index as a methodology to justify selling or a particular SKU. A strong target GMROI for a retail store is 3.20 or higher. A GMROI ratio above 1.00 is an indication that a company is selling their inventory at a higher value than it cost and is making profit on that inventory. This formula is typically used by retailers to evaluate their inventory stock and value. ![]() In some cases, GMROI is multiplied by 100, which with this example would leave GMROI at a value of 166. So, to put all that into a workable example, say you have an annual gross margin is $500,000, whereas the average inventory value you hold is $300,000 in this case your GMROI would be 1.66. So how do you calculate GMROI? The calculation is quite simple: to calculate GMROI take (gross margin $$)/(average inventory investment $$). But what does that mean exactly? In short, GMROI evaluates profitability of your inventory with a simple ratio, analyzing the ability to turn said inventory into cash at a profitable rate above the cost of the inventory. GMROI, also known as gross margin return on investment, is an inventory management metric.
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