Recent orders

the annual average increase in revenue by 17% is not justified keeping in view the current economic situation. It is not feasible if we keep the previous track record of actual versus budgeted of the year 2008 where the advertising actual sales were 7% less than budgeted. Since advertising is considered to be the discretionary expense of companies and it is most likely to be curtailed during recessionary periods. The rebroadcast/content sales on average of 2-3% are a valid ground because previously it was 9% more than the budgeted. In contract the increase in employee costs in accordance with average number of staff isn’t seem reasonable because in recessionary period usually the entities either resort to lay-offs or redundancies or retain the same employees by enhancing their efficiencies. Furthermore

the significant increase in capital expenditure (CAPEX) on intangible assets is also not consistent with amortisation charge. It shows that either amortisation is not charged on additional CAPEX on intangibles or CAPEX is inaccurately included in the cash flow forecast. However

the distribution cost and other overhead cost remain less than budgeted by 9% which can be regarded as a positive sign and control over costs leading to cost savings. Since the interest is anticipated before year

therefore

using your interpretation of the variances as well as other information supplied in the case study to comment on any vulnerabilities in KFun’s profit and cash forecasts for 2009-2013.