CIMA Exam CIMAPRA19-F02-1 Topic 1 Question 87 Discussion

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

Question #: 87
Topic #: 1

AB and CD are competitors supplying components to the car manufacturing industry. AB operates in Country X and CD operates in Country Y. Both entities were incorporated on the same day, are the same size and prepare financial statements to 31 March each year using international accounting standards.

Which of the following statements taken individually would limit the usefulness of the comparison of the return on capital employed ratio between the two entities?

AThe corporate tax rate is 25% in Country X and 40% in Country Y.

BThe average rate of inflation is 3% in Country X and 10% in Country Y.

CThe average rate of borrowing is 2% in Country X and 7% in Country Y.

DThecurrency is Dollar in Country X and Krona in Country Y.

Show Suggested Answer

Suggested Answer: A

by Cristy at May 09, 2024, 10:11 PM

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Katlyn

1 months ago

Wait, they're both in the car parts business and have the same birthday? Sounds like a rom-com plot waiting to happen!

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Loren

17 days ago

A) The corporate tax rate is 25% in Country X and 40% in Country Y.

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Ettie

2 months ago

Different currencies? I bet the exchange rate fluctuations will make this comparison a real headache.

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Stefany

1 months ago

C) The average rate of borrowing is 2% in Country X and 7% in Country Y.

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Derick

1 months ago

B) The average rate of inflation is 3% in Country X and 10% in Country Y.

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Yuette

1 months ago

A) The corporate tax rate is 25% in Country X and 40% in Country Y.

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Kati

2 months ago

Borrowing at 7% in Country Y? No wonder they're not making as much profit as Country X. That's a huge difference!

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Linsey

2 months ago

Wow, 10% inflation in Country Y? That's going to make things tricky when trying to compare the financials.

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Daryl

2 months ago

The corporate tax rate difference between the two countries would definitely impact the comparison of return on capital employed. That's a clear limitation.

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