GMROI (Gross Margin Return on Investment)
Definition
A retail metric measuring the gross margin earned for each unit of money invested in inventory, showing how profitably stock is being used. A GMROI above one means inventory earns more than it costs to hold.
Formula
GMROI = Gross margin ÷ Average inventory cost
Related Terms in Purchasing & Inventory
Sell-Through Rate
The percentage of received inventory sold over a period, indicating how quickly stock moves. A high sell-through points to good demand or lean buying; a low rate signals overstocking.
Backorder
An order for goods that cannot be filled immediately because they are out of stock, but which the customer is willing to wait for. Managing backorders well preserves sales that would otherwise be lost to stockouts.
Goods Receipt Note (GRN)
A document confirming that goods ordered via a purchase order have been physically received and inspected. Part of 3-way matching (PO → GRN → Invoice) to prevent overpayment. HelloBooks has full GRN with validation rules.
Three-Way Matching
A verification process that matches the purchase order, goods receipt note, and vendor invoice to ensure you only pay for what was ordered and received at the agreed price. Prevents fraud and errors.
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