CIMA Exam CIMAPRA19-F02-1 Topic 1 Question 86 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam

Question #: 86
Topic #: 1

Which of the followingreduce the usefulnessof ratio analysis when comparing entities that operate in the same industry? Select ALL that apply.

AThe revenue figure being aggregated from many different activities and sources.

BAccounting estimates in respect of depreciation being different between entities.

CThe effect of a material and unusual item being disclosed separately in the notes.

DAn entity adopting a policy of revaluing its non current assets.

ERatio calculations being based on historical information.

FRatios being quick and easy to calculate.

Show Suggested Answer

Suggested Answer: B

by Julie at May 01, 2024, 11:48 PM

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Lenny

2 months ago

Ha! I bet the answer is F - ratios may be quick and easy, but that's what makes them so misleading when comparing companies. Gotta dig deeper!

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Kimbery

8 days ago

E) Ratio calculations being based on historical information.

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Eura

21 days ago

C) The effect of a material and unusual item being disclosed separately in the notes.

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Helga

27 days ago

B) Accounting estimates in respect of depreciation being different between entities.

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Brice

1 months ago

A) The revenue figure being aggregated from many different activities and sources.

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Brittni

2 months ago

Hmm, I'm not sure about E - historical info is what ratio analysis is based on, so I don't think that's a valid answer.

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Veronica

1 months ago

I agree, historical information is essential for ratio analysis to compare entities accurately.

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Veronica

1 months ago

I think E is actually a valid answer because ratio calculations are based on historical information.

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Beckie

2 months ago

But what about option D? Revaluing assets can also impact ratio analysis, right?

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Tresa

2 months ago

I agree with Detra, different depreciation estimates can make comparisons difficult.

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Casie

2 months ago

I agree, and I'd add that D also reduces comparability since different asset valuation policies skew the ratios.

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Alesia

29 days ago

I agree, and I'd add that D also reduces comparability since different asset valuation policies skew the ratios.

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Britt

1 months ago

E) Ratio calculations being based on historical information.

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Katy

1 months ago

B) Accounting estimates in respect of depreciation being different between entities.

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Nell

2 months ago

A) The revenue figure being aggregated from many different activities and sources.

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My

2 months ago

A and B definitely reduce the usefulness of ratio analysis. Accounting differences between companies make it hard to compare apples to apples.

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Detra

3 months ago

I think option B reduces the usefulness of ratio analysis.

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