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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2 days 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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4 days ago

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

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6 days ago

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

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7 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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9 days 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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14 days ago

I think option B reduces the usefulness of ratio analysis.

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