- Gross Margin Return on Inventory Investment (GMROII or Jim Roy) is a profitability evaluation ratio calculated by dividing gross margin by inventory cost.
- Basically, it is a measurement of the health of an item -- how much inventory you have invested compared to how much profit you are making from that inventory.
- General rule is that you want three times the profit over inventory.
- It is a good way to value slow selling but high dollar retail items vs. high volume items with low retail prices.