Menteks Co's Accounts receivable turnover is 5.4 and inventory turnover is 4.8. These ratios are respectively 8 and 6 for the industry. The company's annual sales are $960,000 and they are all on credit. The company has a gross profit margin of 20% and it borrows at an interest rate of 10%.
a) How much funds has been unnecessarily tied up in the current assets of the company?
b) Because of the unnecessary funds tied up in current assets, how much less is expected to be the profit figure of the firm?