Gross margin return on inventory investment

Definition

Gross margin dollars earned for each dollar of average inventory, carried at cost and not at retail.

Why It Matters

Margin alone flatters a slow book and turns alone flatter a thin one, so the trade multiplies them. It is the number that tells you whether the shelves are earning their keep, and it is calculable from a seller's own figures without asking for anything they do not already have. Work it by product family and not in total: most distributors have one family carrying the business and another quietly financing itself at the buyer's expense.