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

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 87
Topic #: 1
[All CIMAPRA19-F02-1 Questions]

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?

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Suggested Answer: A

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

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Katlyn
14 days 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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Ettie
1 months ago
Different currencies? I bet the exchange rate fluctuations will make this comparison a real headache.
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Stefany
14 days ago
C) The average rate of borrowing is 2% in Country X and 7% in Country Y.
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Derick
27 days ago
B) The average rate of inflation is 3% in Country X and 10% in Country Y.
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Yuette
28 days ago
A) The corporate tax rate is 25% in Country X and 40% in Country Y.
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Kati
1 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
1 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
1 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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Talia
9 days ago
B) The average rate of inflation is 3% in Country X and 10% in Country Y.
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Staci
30 days ago
A) The corporate tax rate is 25% in Country X and 40% in Country Y.
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Cassie
2 months ago
But what about the inflation rates? Wouldn't that also distort the comparison?
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Rex
2 months ago
I agree with Annelle. The tax rates can significantly affect the return on capital employed ratio.
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Annelle
2 months ago
I think the different corporate tax rates would definitely impact the comparison.
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