Effects of Improved Inventory Turnover. In 1997, Achram Company earned a net income of \(\$ 270,000\) on an average asset investment of \(\$ 3,300,000\). The controller noted, however, that the inventory turnover of six represented 60 days of sales. Average inventory was \(\$ 900,000\) and thought to be too high. By eliminating obsolete inventory and planning target inventory levels, inventory was reduced to \(\$ 600,000\). Before the inventory reduction, current assets averaged \(\$ 1,500,000\); and current liabilities averaged \(\$ 600,000\). Assume that accounts payable will decrease by half of the inventory reduction and borrowings will decline by an amount equal to the other half. After the inventory reduction, 1998 operations will yield a \(\$ 276,000\) net income, the same as in 1997 except for interest expenses which are expected to decline by \(\$ 6,000\) after taxes.

Required:

1. Find the inventory turnover before and after the inventory reduction.

2. Find the current ratio before and after the inventory reduction.

3. What is the expected return on assets before and after the inventory investment cutback?