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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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Cyndy
15 days ago
Definitely agree, return on capital employed is not comparable either!
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Heike
20 days ago
I think non-current asset turnover won't be reliable due to the different accounting treatments.
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Providencia
26 days ago
Gross profit margin seems comparable since both charge expenses to cost of sales.
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Edelmira
1 month ago
Totally agree, A is the only one that makes sense here!
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Argelia
1 month ago
Wait, how can they have the same ratios with such different setups?
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Talia
1 month ago
C) Non current asset turnover is definitely not comparable!
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Frankie
2 months ago
I think B) Return on capital employed won't work due to the loan vs lease.
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Verona
2 months ago
A) Gross profit margin is comparable.
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Kizzy
2 months 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
2 months 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
2 months 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
2 months 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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