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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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Delmy
9 hours ago
D is crucial. Currency differences complicate comparisons.
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Larae
6 days ago
C is important too. Borrowing costs differ significantly.
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Wayne
11 days ago
True, Sarah. Higher inflation in Country Y reduces value.
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Alaine
16 days ago
B also matters. Inflation impacts real returns.
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Sherman
21 days ago
I agree, Jenna. Higher tax in Country Y skews results.
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Gerald
26 days ago
A is a big factor. Different tax rates affect profits.
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Lilli
1 month ago
Currency differences can really complicate comparisons, for sure.
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Lindsey
1 month ago
Wait, how does currency affect the return ratio? Seems odd.
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Avery
1 month ago
Borrowing rates are way different, that matters for capital employed.
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Irene
2 months ago
I think inflation impacts the numbers too, especially at 10%!
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Wade
2 months ago
Higher tax rate in Country Y definitely skews the comparison.
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Jesus
2 months ago
Currency differences definitely complicate comparisons, so I’d lean towards option D being a major factor in limiting usefulness.
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Roslyn
2 months 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
2 months 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
2 months 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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