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Calculation of a few commonly used profitability indicators:
GM % = (Selling Price - Cost) x 100 / Selling Price Example: You sold an item for $49.95, and the cost of the item is $30.00. GM % = (49.95 - 30.00) x 100 / 49.95 = 39.94%
Mark Up % = (Selling Price - Cost) x 100 / Cost Using the above example, Mark Up % = (49.95 - 30.00) x 100 / 30.00 = 66.5% Inventory (at retail) divided by average weekly sales for a given period of time. So, if you have $8,000.00 worth of inventory in one product, and your total sales of that product for the past 6 weeks is $12,000.00 the calculation would look like this: $12,000.00 divided by 6 = average weekly sales of $2,000.00 $8,000.00 divided by $2,000.00 = 4 This means that if you did not replenish your inventory and sales continued at the same pace, you would deplete your inventory of that product to zero within 4 weeks.
GMROII = GM% x (Sales / Avg. Inventory) Example: Still using the same numbers from Gross Margin calculation, assume that the store's net sales over a period of 12 months is 24M and during this time it carries an average inventory of 6M. Then: GMROII % = 39.94 x (24 / 6) = 159.76%
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