Forecast financial statements for the year ended 31 December 2016

You have received the following email:

From: Monica Lall, Chief Executive

To: Financial Manager

Subject: projected profits

Hi,

The controversy over Town Logistics continues. The Board is feeling a little sensitive to criticism over their management of Pizzatime's relationship with the company. With that in mind, I have had the Finance Director prepare a set of forecast financial statements, which I have attached to this email.

The new home delivery service will have been fully operational for almost six months by the year end. The service has already been hugely successful and has significantly increased both revenue and profit.

The directors' bonuses are linked to reported revenue according to the financial statements. As a retail organisation, our survival depends on sales revenue. Also, our restaurant managers' revenue targets are based on total revenue, including home delivery sales, although many of them have refused to accept responsibility for these sales.

I need your advice on two matters:

The first is that we are planning to argue that the shareholders should take comfort from these figures and should relax and allow the Board to manage Pizzatime without undue interference. Do you agree that these figures show that the Board is excelling?

Can we argue that the present directors' bonus scheme continues to align our interests with those of the shareholders? On a related matter, is the refusal of the restaurant managers to accept responsibility for home delivery sales justified?

Regards

Monica Lall

Chief Executive

Pizzatime