CIPS L3M1 Exam Practice Test Instant Access

Question 1

Which of the following might be objectives of private sector organisations? Select all that apply.

ATo maximise taxation

BTo minimise profit

CShareholder value

DMarket share

Answer : C, D

To gain market share and to create shareholder value (increase the value of shares) are common aims of private sector organisations.

The other two answers are the antithesis of what firms usually want.

Question 2

The 'five forces' model is also known as an 'Industry Structure Analysis'.

True or false?

ATrue

BFalse

Answer : A

This is true. In my view, 'Industry Structure Analysis' is a better term, not only because that is what Michael Porter originally called it, but because it better describes what the model is about. For ex-ample, it reminds us that the model is not about a single firm, but it is about an entire industry, and the structure around that industry.

Question 3

Which of the following would not normally be seen as part of public sector procurement?

AAchieving defined service levels

BPersonal bonus payments for procurement staff, linked to savings made

CAn emphasis on the use of the competitive principle

DPersonal financial rewards from suppliers for buyers in return for awarding contracts

EPursuit of equal opportunities policies, internally and externally

Answer : B, D

Public sector procurement staff are expected to work and offer their best to their employer, normal-ly without additional reward for creating cost savings, which is part of their work; and they should not receive rewards from suppliers.

This latter point takes us into the area of procurement ethics, which CIPS regards as being particu-larly significant for procurement professionals.

The other answers shown are typical features of public sector procurement.

Question 4

Shareholders of a limited company are not liable for unpaid debts'. True or false?

AFalse

BTrue

Answer : B

This is true: the liability of shareholders is limited to their agreed financial commitment, not beyond that.

Question 5

A 'genuine pre-estimate of loss' describes:

AA quantum meruit award

CLiquidated damages

CUnliquidated damages

DA penalty clause

Answer : C, C

This a definition of liquidated damages. Calculated in advance of the event occurring ie pre-contract and thus agreed by the parties in advance. Meaningful advance calculations (estimates) must be available to enforce legally.

The term and the spirit of 'penalty clause' is discouraged in English law - damages should be aimed at returning the damaged party back into the position they would have been in, had a wrong not been done.

Unliquidated damages can only be awarded by a court after the event, and should not be relied up-on.

An example of a quantum meruit award can be found in the British Steel v Cleveland Bridge (1984) case - a rare occurrence, and again something which must not be relied upon.

Question 6

Which one of the following is a commercial document issued by a buyer describing requirements for products or services to be provided by a seller?

ARequisition

BPurchase order

CInvoice

DSupplier quotation

Answer : B

The only one of these four which fits the bill is 'purchase order'.

The supplier quotation and the invoice both come from the supply side.

The requisition is an internal document.

Question 7

A limited company is an incorporated body.' True or false?

ATrue

BFalse

Answer : A

This is true.

A limited company has its own legal identity.

(Your syllabus makes reference to 'unincorporated companies'. This is something of a contradiction - the term 'company' implies incorporation. Although I have not been permitted to see your actual ex-am QUESTION NO :s, it seems unlikely that you will be QUESTION NO :ed on this particular point).

CIPS L3M1 Procurement and Supply Environments Exam Practice Test