CIPS L4M4 Ethical and Responsible Sourcing Exam Practice Test

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Total 180 questions
Question 1

What is a risk of pre-warning a supplier that you will conduct an audit of their facilities?



Answer : D

A risk of pre-planning an audit is the supplier has time to prepare for it. It's a good thing in that they can get their paperwork in order but the downside is they can overprepare so you don't get a realis-tic representation of what they're doing. One way they can do this is coaching staff in what to say to the auditors.


Question 2

Sourcing products internationally involves extra considerations when looking at the price of the item. Which of the following are additional price considerations for international sourcing? Select TWO



Answer : A, C

Exchange rates and tariffs are associated with international sourcing.

The other options are concerns for both local sourcing and international sourcing.


Question 3

Daniel is evaluating bids from new suppliers who are looking to supply his company XYZ Indus-tries with components for manufacturing. Although price is important, Daniel wishes to consider 'added value'. Which of the following is considered an 'added-value solution'? Select THREE



Answer : A, B, D

The correct answers are innovation, on time in full deliveries and sustainability.

The other options are pricing mechanisms rather than 'added value'. Added Value is giving the buyer something extra that's not necessarily financial. It can be as simple as delivering orders quicker than expected, or having a dedicated customer service phone line. Something that makes their lives a little easier.


Question 4

Which of the following financial documents would show whether a supplier has sufficient funds to pay their subcontractors in the short term?



Answer : D

A cash flow statement shows the money coming in and out. This would therefore show whether a supplier has enough money coming in, to be able to pay some of it out to a subcontractor.

P&L and Balance Sheets look more broadly at finances, rather than saying what's physically in the bank at a specific given time.

Do learn the difference between these three financial documents for the exam.

Balance Sheet: , Components, and Examples (investopedia.com)

Profit and Loss Statement Meaning, Importance, Types, and Examples (investopedia.com)

Cash Flow Statement: How to Read and Understand It (investopedia.com)


Question 5

Ivan is an investor who is looking to invest in new businesses. He is reviewing several companies and working out what his equity would be. Which of the following does Ivan need to know to calculate shareholder equity? Select TWO.



Answer : C, D

Shareholder Equity = Total Assets - Total Liabilities


Question 6

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

0current liabilities



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 7

When working closely with a supplier, waste can be reduced which can lead to improved business functions and cost savings. Which of the following are wastes that can be removed from the supply chain? Select THREE.



Answer : A, D, E

The correct answers are; motion, waiting and inventory.

This is part of Ohno's 8 Wastes. You can remember this with the acronym Tim Woods; transportation, inventory, motion, waiting, over-production, over-processing, defects, skills.

This is only mentioned briefly in this module but comes up in other modules more in depth, so is worth memorising if you can.


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Total 180 questions