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CIMAPRA19-F02-1 Exam - Topic 4 Question 101 Discussion

Which of the followingreduce the usefulnessof ratio analysis when comparing entities that operate in the same industry?Select ALL that apply.
A) The revenue figure being aggregated from many different activities and sources. and B) Accounting estimates in respect of depreciation being different between entities. and D) An entity adopting a policy of revaluing its non current assets. and E) Ratio calculations being based on historical information.
C) The effect of a material and unusual item being disclosed separately in the notes.
F) Ratios being quick and easy to calculate.

CIMAPRA19-F02-1 Exam - Topic 4 Question 101 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 101
Topic #: 4
[All CIMAPRA19-F02-1 Questions]

Which of the followingreduce the usefulnessof ratio analysis when comparing entities that operate in the same industry?

Select ALL that apply.

Show Suggested Answer Hide Answer
Suggested Answer: A, B, D, E

by Chun at Sep 14, 2024, 02:04 AM

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Daron
8 months ago
Surprised that F is even listed, it’s not a drawback!
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Arlette
8 months ago
Totally agree with E, historical info can skew results.
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Antonio
8 months ago
Wait, how does D even make sense?
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Serita
8 months ago
I think C is also a big factor!
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Rachael
9 months ago
A and B definitely affect comparisons.
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Buck
9 months ago
I recall that historical information can limit the relevance of ratios, so E seems like it could be a valid choice as well.
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Flo
9 months ago
I practiced a similar question where unusual items affected ratios. I think C might reduce usefulness since those items can distort the true financial picture.
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Sanjuana
9 months ago
I'm not entirely sure, but I feel like the revenue aggregation from different sources could complicate things too. Maybe A is relevant?
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Eun
9 months ago
I remember discussing how different accounting estimates, like depreciation, can really skew comparisons between companies. So, I think B is definitely a factor.
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Bobbye
9 months ago
I feel pretty confident about this. The key is to recognize that anything that creates inconsistencies or lack of comparability between the companies' financial information will reduce the usefulness of ratio analysis.
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Lucille
9 months ago
Okay, I think I've got a handle on this. The key is to identify which factors make it difficult to directly compare ratios across companies, even if they're in the same industry.
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Dorothy
9 months ago
Hmm, I'm a bit unsure about this one. I'll need to think through how each of these factors could impact the comparability of ratios between entities in the same industry.
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Tasia
9 months ago
This question seems straightforward, but I'll need to carefully consider each option to determine which ones reduce the usefulness of ratio analysis.
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Cherrie
10 months ago
Ah, this is a tricky one. I'll need to really focus on understanding how each of these elements could introduce differences in the ratios, making them less useful for comparison.
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Carolann
2 years ago
I'm starting to think the person who wrote this question has a vendetta against ratio analysis. Where's the love?
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Ressie
2 years ago
This question is giving me a headache. I'd rather be analyzing financial ratios than taking this exam.
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Jesus
2 years ago
E) Ratio calculations being based on historical information.
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Melvin
2 years ago
B) Accounting estimates in respect of depreciation being different between entities.
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Lorrine
2 years ago
A) The revenue figure being aggregated from many different activities and sources.
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Chaya
2 years ago
F? Really? Ratios being quick and easy to calculate is a disadvantage? What kind of question is this?
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Lenna
2 years ago
D and E are also important factors. Revaluing assets and using historical data can really skew the ratios.
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Tyisha
2 years ago
C) The effect of a material and unusual item being disclosed separately in the notes.
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Titus
2 years ago
B) Accounting estimates in respect of depreciation being different between entities.
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Benedict
2 years ago
A) The revenue figure being aggregated from many different activities and sources.
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Shantay
2 years ago
But what about option C? I think disclosing material and unusual items separately can also impact the comparison.
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Bettyann
2 years ago
A and B for sure. How can you compare entities when they have different accounting practices? That's just ridiculous.
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Catalina
2 years ago
A and B for sure. How can you compare entities when they have different accounting practices?
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Jackie
2 years ago
B) Accounting estimates in respect of depreciation being different between entities.
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Eloisa
2 years ago
A) The revenue figure being aggregated from many different activities and sources.
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Slyvia
2 years ago
I agree with Donte. Different accounting estimates and revaluing assets can definitely skew the ratios.
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Donte
2 years ago
I think options A, B, and D reduce the usefulness of ratio analysis.
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