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CIMAPRA19-F02-1 Exam - Topic 5 Question 129 Discussion

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?
B) The average rate of inflation is 3% in Country X and 10% in Country Y.
A) The corporate tax rate is 25% in Country X and 40% in Country Y.
C) The average rate of borrowing is 2% in Country X and 7% in Country Y.
D) Thecurrency is Dollar in Country X and Krona in Country Y.

CIMAPRA19-F02-1 Exam - Topic 5 Question 129 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 129
Topic #: 5
[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: B

by Roselle at Jun 27, 2026, 06:14 PM

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Jesus
Currency differences definitely complicate comparisons, so I’d lean towards option D being a major factor in limiting usefulness.
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Roslyn
5 days ago
I’m not entirely sure, but I feel like borrowing rates might not be as significant as tax or inflation. Maybe option C isn’t as limiting?
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Milly
10 days ago
I think inflation rates might also play a role, especially since they can distort real returns. So, option B could limit usefulness too.
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Justine
15 days ago
I remember discussing how different tax rates can impact profitability, so option A seems like it could really affect the comparison.
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