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CIMA Exam CIMAPRA19-F02-1 Topic 1 Question 109 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 109
Topic #: 1
[All CIMAPRA19-F02-1 Questions]

PQ and WX are similar sized entities andoperate in thesame industry within Country X . Both operate from a single warehouseand have similar levels of non current asset resources.

The following ratioshave been calculated at 31 October 20X8:

If considered individually, which of the following would limit the usefulness of these ratios in assessing the comparative financial performances of PQ and WX?

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Suggested Answer: A

by Jeannine at Mar 24, 2025, 03:40 AM

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Dean
3 months ago
The depreciation and lease issues are definitely red flags. It's like trying to compare the speed of a car and a motorcycle while one's in reverse and the other's in fifth gear.
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Truman
2 months ago
C) Year end review of equipment resulting in WX charging an impairment loss while PQ's equipment is not impaired.
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Chau
2 months ago
B) Operating lease rentals for plant and equipment being charged to administration expenses by PQ and distribution costs by WX.
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Lorenza
2 months ago
A) Depreciation of warehouses being charged to cost of sales by PQ and distribution costs by WX.
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Brett
3 months ago
This is like a game of 'spot the difference' - you need to make sure the entities are using the same accounting methods to get a fair comparison. Otherwise, it's like trying to play chess with a Rubik's cube.
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Roy
4 months ago
Increased raw material prices affecting both entities equally shouldn't really impact the comparative analysis, in my opinion. The other factors seem more relevant.
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Dean
2 months ago
C) Year end review of equipment resulting in WX charging an impairment loss while PQ's equipment is not impaired.
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Britt
2 months ago
C) Year end review of equipment resulting in WX charging an impairment loss while PQ's equipment is not impaired.
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Margarita
2 months ago
B) Operating lease rentals for plant and equipment being charged to administration expenses by PQ and distribution costs by WX.
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Valentin
3 months ago
B) Operating lease rentals for plant and equipment being charged to administration expenses by PQ and distribution costs by WX.
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Alysa
3 months ago
A) Depreciation of warehouses being charged to cost of sales by PQ and distribution costs by WX.
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Daniel
3 months ago
A) Depreciation of warehouses being charged to cost of sales by PQ and distribution costs by WX.
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Catalina
4 months ago
The impairment loss for WX's equipment could be a significant factor affecting the performance comparison. Without a similar adjustment for PQ, the ratios won't provide an accurate picture.
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Audry
3 months ago
C) Year end review of equipment resulting in WX charging an impairment loss while PQ's equipment is not impaired.
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Davida
3 months ago
A) Depreciation of warehouses being charged to cost of sales by PQ and distribution costs by WX.
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Dana
4 months ago
The different accounting treatments for depreciation and leases between PQ and WX would definitely limit the usefulness of these ratios. It's like comparing apples and oranges.
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Jose
4 months ago
But what about option A? Depreciation charged to different expenses could also skew the ratios.
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Alana
4 months ago
I agree with Reiko, if one entity has an impairment loss, it would affect the comparison.
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Reiko
5 months ago
I think option C would limit the usefulness of the ratios.
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