CIPS L4M4 Exam Practice Test Instant Access

Question 1

A procurement manager for a major retail group is using ratio analysis to assess the financial viability of suppliers who have tendered for a logistics services tender. The recommended supplier has a current ratio of 0.6. What are the potential consequences of awarding the contract to this supplier, given their current ratio is below 1?

AThe results of the current ratio do not mean anything as long as the supplier has proven technical merit

BThe supplier will be unable to cover long-term liabilities from revenues

CThe supplier will have cash reserves to cover unexpected expenses

DThe supplier will be unable to pay its short-term liabilities using current assets

Answer : D

A current ratio below 1 suggests that the supplier may not have sufficient current assets to cover short-term liabilities, which could pose a risk to the buyer. Assessing financial stability aligns with responsible sourcing practices, as it ensures suppliers can fulfill contracts without disruption.

Question 2

Which of the following is considered as part of ESG?

Abribery, corruption and the environment

Bmarket conditions and product lifecycle

Cliquidity, gearing and profitability

Deconomic and social governance

Answer : B

The correct answer is bribery, corruption and the environment.

ESG stands for environmental and social governance. It's the new buzzword for CIPS and is basically everything to do with ethical procurement- so areas such as bribery and corruption are included as well as the environment.

Option 4 is incorrect as economic doesn't come into it.

Question 3

Incoterms are divided into four main groups to follow the movement of goods covering the exporter's premises, export and import points, and cost and risk. Which letters represent the four groups of Incoterms?

AE, F, C, and D

BE, F, B, and C

CB, C, F, and G

DA, B, C, and D

Answer : A

Incoterms are grouped as E (Ex Works), F (Free Carrier), C (Carriage Paid To), and D (Delivered Duty Paid), reflecting various stages of responsibility transfer between buyer and seller. Understanding Incoterms is critical for responsible sourcing, as it clarifies logistics and cost responsibilities.

Question 4

Elaine works for a British manufacturer of confectionary (sweets/ candy) items. One of the key ingredients is cocoa powder, which cannot be grown in the UK. Elaine therefore needs to look abroad for suppliers. Which of the following are risks that Elaine needs to consider when sourcing internationally? Select THREE

Acurrency exchange fluctuations

Bshortened lead times

Cethical behavior

Dexport tariffs

Ecultural differences

Answer : A, C, E

The correct answers are; currency exchange fluctuations, ethical behavior and cultural differences.

Shortened lead times is not correct because sourcing internationally would result in longer lead times. Export tariffs is not correct as Elaine is importing the items into the UK, not exporting them.

Question 5

Yolo Inc. have recently run a tender opportunity to find a suitable supplier of yoyos and they have received a number of bids. The supplier will become a strategic partner to the business as yoyos are vital to the success to Yolo Inc. The tender asked for both price submissions and had a number of quality questions. Eamon is the Procurement Manager of Yolo Inc and is responsible for selecting the most appropriate supplier. How should Eamon appraise the bids?

Aevaluate the bids himself as this is a complex requirement

Bevaluate the bids himself as this is a strategic purchase

Corganise a cross-functional team to assess the bids as people from other departments may have important information and experience of yoyos

Dorganise a cross-functional team of procurement personnel as they will have experience in assessing price and quality of bids

Answer : C

Eamon should use a cross-functional team (this rules out two of the options). The purpose of using a cross-functional team is to use the knowledge of people from other departments as they may better understand the service required and help assess any technical questions. Therefore a cross-functional team of procurement personnel, isn't cross-functional (they're all the same function). Yoyos is a bit of a silly example, the exam questions are a little more serious- but the learning outcome is the same; use a cross-functional team to evaluate bids.

Question 6

Which of the following characteristics are likely to be required within sourcing processes undertaken in the public sector?

An emphasis on long-term supplier relationships where possible

Maintaining service levels within value and cost parameters

All dealings between buyers and suppliers are kept confidential

A competitive tendering process is usually encouraged

A2 and 4 only

B1 and 2 only

C2 and 3 only

D1 and 3 only

Answer : A

Public sector sourcing prioritises maintaining service levels within budget constraints and often mandates competitive tendering to promote transparency and fairness. These principles align with ethical sourcing practices, ensuring responsible expenditure and fair competition among suppliers.

Question 7

What is a major benefit to using Incoterms when sourcing goods internationally?

Ait ensures value for money

Bit ensures ethical business practices

Cit replaces lengthy contractual clauses

Dit replaces the need for insurance

Answer : C

Incoterms can replace lengthy contract clauses as they replace the need for contracts to detail which party is responsible for organising transport, paying duties, having the insurance etc.

Incoterms is an odd one for exam topics- some students say it was a huge part of their exam and there were many questions on this. Others said there were just one or two. Questions get randomly assigned from the bank so it's completely random how many you'll get on this topic.

CIPS L4M4 Ethical and Responsible Sourcing Exam Practice Test