Inventory turnover; calculation and evaluation
Response to the following problem:
The following is a portion of the condensed income statement for Rowan, Inc., a manufacturer of plastic containers:
Net sales $2,460,000
Less: Cost of goods sold:
Inventory, January 1 $ 630,000
Net purchases 1,900,000
Inventory, December 31 (690,000) 1,840,000
Gross profit $ 620,000
Required:
1. Determine Rowan's inventory turnover.
2. What information does this ratio provide?