CIPS L4M4 Exam Questions Instant Access - No Installation Required

Question 1

The procurement manager has received the following data from the supplier's accounts to facilitate the calculation of the supplier's current ratio:

Current Assets: Stock $200; Debtors $60; Cash $40; Total $300

Short Term Liabilities: Bank overdraft $150

Which calculation will the procurement manager use to find out the current ratio?

A(300 - 200) 150

B300 150

C(300 - 200 - 150) 100

D(300 150) 100

Answer : B

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. It is calculated by dividing current assets by current liabilities. In this case:

Current Assets = $300

Current Liabilities = $150

Current Ratio = 300 150 = 2.0

This indicates that the supplier has twice as many current assets as current liabilities, suggesting good short-term financial health.

CIPS Level 4 Diploma in Procurement and Supply, L4M4 Study Guide, Section 2.3: Financial Appraisal of Suppliers

Question 2

Why do tenders often have longer timescales in the public sector when compared with those of the private sector?

AThere is a more detailed debrief requirement in the public sector

BThere is wider stakeholder involvement in the public sector

CAll public sector purchases are mandated to use a tendering procedure

DRegulation of the public sector usually dictates minimum timescales

Answer : D

Public sector procurement is governed by specific regulations that stipulate minimum timescales for various stages of the tendering process. These regulations are designed to ensure transparency, fairness, and adequate time for suppliers to prepare their bids. For instance, under the Procurement Act 2023, certain procedures have defined minimum periods for tender submissions to allow sufficient time for supplier participation.

Exact Extract from Study Guide:

'Public sector procurement is subject to specific regulations that dictate minimum timescales for tendering processes to ensure fairness and transparency.'

Question 3

Which of the following would you use to work out a company's gearing ratio? Select TWO.

0current liabilities

Anet profit

Bshareholder equity

Clong term debt

Dgross sales

Answer : A, C

Gearing measures how much of an organisation's long-term funding is made up of long term debt and loans. Therefore the correct answers are 'shareholder equity' and 'long term debt'.

There are many question about financial ratios that can come up on the exam. If you're unsure on them I suggest doing further reading outside of the study guide as this will help. I like this youtube video (I'm not associated with the makers of this video but think they're really good at explaining things to beginners) Gearing Ratio explained (youtube.com)

Question 4

Other than price, what should a buyer consider when evaluating supplier quotations?

Lead times

Add-on costs

Wastage rates

Past performance

A1, 2, and 4 only

B1, 2, and 3 only

C2, 3, and 4 only

D1, 3, and 4 only

Answer : A

In addition to price, factors like lead times, add-on costs, and past performance are important to ensure the supplier meets the buyer's requirements sustainably and reliably. These criteria align with ethical sourcing by promoting value and accountability beyond just cost considerations.

Question 5

Which beneficial outcomes would result from a procurement decision to change supply to a local source for a services contract?

Select TWO that apply.

AReduced impacts on the local environment

BEmployment opportunities for local workers

CEconomic stimulation for the local area

DReduced need for contract management

EImproved innovation in service design

Answer : B, C

Sourcing services locally can deliver social and economic benefits, including the creation of local employment opportunities and economic stimulation within the community. Local suppliers often reinvest in the local economy, supporting regional development and social value objectives. While reduced environmental impact may occur, it is not guaranteed for services, and contract management requirements remain regardless of supplier location. Ethical and responsible sourcing encourages consideration of social value outcomes, particularly where procurement decisions can positively impact local communities and stakeholders.

Question 6

What type of relationship should a buyer seek when making strategic sourcing for their business?

Atransactional

Bcollaborative

Carms-length

Dpartnership

Answer : B

The buyer should seek a 'collaborative' relationship. Transactional and arms-length relationships are more suited to tactical sourcing. Partnerships are reserved for joint-ventures.

Question 7

What might a buyer encounter if the supplier's government has introduced a protectionist measure?

AInward processing relief

BArbitration

CImport duties

DCarnets

Answer : C

Protectionist measures are designed to shield domestic industries from foreign competition. The most common form is import duties (tariffs), which raise the landed cost of goods entering the country. This creates a barrier to trade by making imports less competitive compared to local products. Arbitration is a dispute resolution method, not a trade barrier. Carnets are documents for temporary duty-free movement of goods, and inward processing relief is an exemption for goods imported for re-export. Responsible sourcing requires buyers to anticipate the cost and risk implications of protectionism when engaging in international supply.

CIPS Ethical and Responsible Sourcing L4M4 Exam Questions