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Communication Activity CT9.4 Service In order to better serve the rural patients, Drs. Hao and Jun Zhang (brothers) began giving safety seminars. Especially popular were their emergency preparedness" talks given to farmers Many people asked whether the "it" of materials the doctors recommended for common form emergen cies was commercially available. After checking with several supplies, the doctors realized that no other company offered the sup- plies they recommended in their seminars, packaged in the way they described. Their wives, Tian and Qing. agreed to make a test package by ordering supplies from various medical supply companies and assembling them into a "kl" that could be sold at the seminars. When these kits proved a runaway su cess, the sister-in-law decided to market them. At the advice of their accountant, they organized this ventore as a separate company, called Life Protection Products (LPP), with Tian Zhang as CEO and Qing Zhang a Secretary-Treasure LPP soon started receiving requests for the kits from all over the country, as word spread about their availability. Even without advertising. LPP was able to sell its full inventory every month. However, the company was becoming financially strained. Tian and Qing had about HK$1,000,000 in savings, and they invested about half that amount initially. They believed that this venture would allow them to make money. However, at the present time, only about HK$300,000 of the cash remains, and the company is constantly short of cash. Tian has come to you for advice. She does not understand why the company is having cash flow problems. She and Qing have not even been withdrawing salaries. However, they have rented a local building and have hired two more full-time workers to help them cope with the increasing demand. They do not think they could handle the demand without this additional help Tian is also worried that the cash problems mean that the company may not be able to support itself. She has prepared the cash budget that follows. All seminar customers pay for their product in full at the time of purchase. In addition, several large companies have ordered the kits for use employees who work in remote sites. They have requested credit terms and have been allowed pay in the month following the sale. These large purchasers amount to about 25% of the sales att present time. LPP purchases the materials for the kits about 2 months ahead of time. Tian and in are considering slowing the growth of the company by simply purchasing less materials, which will mean selling fewer kits. The workers are paid weekly. Tian and Qing need about HK$150,000 cash on hand at the beginning of the month to pay for purchases of raw materials. Right now they have been using cash from their ings, but as noted, only HK$300,000 is left June HK$150.000 125,000 375,000 650,000 Life Protection Products Cash Budget For the Quarter Ending June 30, 2020 April May Cash balance, beginning HK$150,000 HK$150,000 Cash received From prior month sales 50.000 75,000 From current sales 150,000 225.000 Total available cash 350,000 450,000 Cash payments To employees 30.000 30,000 For products 250.000 350,000 Miscellaneous expenses 50,000 60,000 Postage 10,000 10,000 Total cash payments 340,000 450.000 Cash balance HKS 10,000 HKS 0 Borrow from savings HK$140,000 HK$150,000 Borrow from bank? HKS D HKS 0 30,000 450,000 70.000 10,000 560,000 HK$ 90,000 HKS 10,000 HKS 50,000 Instructions Write a response to Tian Zhang Explain why LPP is short of cash Will this company be able to opport iteit? Explain your answer. Make any recommendations you deem appropriate