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CIMAPRA19-F02-1 Exam - Topic 4 Question 122 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 122
Topic #: 4
[All CIMAPRA19-F02-1 Questions]

AB and CDare separate entities that preparefinancial statements to 31 Mayusing international accounting standards. AB and CDprovidetechnical supportservices to the financial services industry and operate in the same country. The financial statements are identical except for the following:

* ABpurchased alloperatingequipment, paying $100,000,using a 5 year bank loan. The useful life of the equipmentwas 5 years.

* CDsigned an operating lease agreement for alloperatingequipment for 5 years paying $20,000peryear.

Bothentities charge all expenses relating tothe equipment to cost of sales.

From the information provided, whichof the following ratios wouldbereliablycomparable for AB and CD?

Show Suggested Answer Hide Answer
Suggested Answer: A

by Lisha at Mar 08, 2026, 08:48 PM

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Frankie
2 days ago
I think B) Return on capital employed won't work due to the loan vs lease.
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Verona
7 days ago
A) Gross profit margin is comparable.
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Kizzy
12 days ago
Return on capital employed seems tricky because AB has a loan and CD has lease payments. I’m not confident about that one.
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Yesenia
17 days ago
I practiced a similar question where we had to compare ratios of companies with different asset structures. I wonder if non-current asset turnover will be reliable here.
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King
22 days ago
I think the gross profit margin might be comparable since both companies charge expenses to cost of sales, but I’m not entirely certain.
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Melinda
27 days ago
I remember that operating leases can affect how we calculate certain ratios, so I’m not sure if all of them will be comparable.
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