Spring Special Limited Time 70% Discount Offer - Ends in 0d 00h 00m 00s - Coupon code = getmirror

Home
CIPS
CIPS Level 4 Diploma in Procurement and Supply
L4M4
Ethical and Responsible Sourcing Questions and Answers

Pass the CIPS Level 4 Diploma in Procurement and Supply L4M4 Questions and answers with ExamsMirror

Practice at least 50% of the questions to maximize your chances of passing.

Exam L4M4 Premium Access

View all detail and faqs for the L4M4 exam

Go to Exam

823 Students Passed

97% Average Score

97% Same Questions

Viewing page 3 out of 10 pages

Viewing questions 21-30 out of questions

Questions # 21:

The gross profit of a company can be calculated by using a simple formula. What is this?

Options:

total revenue - cost of sales

assets - liabilities

cost of sales - fixed assets

debt owed - total sales

Answer

Explanation

gross profit = total revenue - cost of sales.

Learn all you can about financial ratios and financial statements for the exam- it's a very common topic

Questions # 22:

A company has a requirement for an item that has been identified as strategic on the positioning model. The company needs to invite competitive tenders and ensure the selected supplier of this item is in a good financial position. What should the company ask the suppliers to send to show that their current assets cover their current liabilities?

Options:

Profit and loss account

Annual turnover

Gearing ratio

Acid test

Answer

Explanation

The acid test (quick ratio) is an effective measure of a supplier's ability to meet short-term liabilities, providing insights into financial stability. This aligns with responsible sourcing by ensuring the supplier is financially capable of fulfilling a strategic contract.

Questions # 23:

Which of the following payment mechanisms is most beneficial to the supplier?

Options:

open account

cash in advance

sight draft

letter of credit

Answer

Explanation

cash in advance is the most beneficial to a supplier.

Open account /credit account is the most beneficial to the buyer. Learn this as it's a known exam topic.

Questions # 24:

Which of the following is a regulatory body which protects the rights of workers?

Options:

ISO

ILO

FairTrade

WWF

Answer

Explanation

ILO = the International Labour Organisation.

ISO is the International Standardisation Organisation- they also come up in this exam.

Fair Trade is about paying suppliers properly.

WWF is the World Wildlife Foundation, or if you watched wrestling in the 90s, the original WWE. You do not need to know about wildlife or wrestling for this exam.

Questions # 25:

Greg is doing some research on a potential supplier and is concerned that the supplier's funding is based on long-term debts and loans. Working with this supplier therefore might bring additional risks to Greg's business. What should Greg do about his concerns?

Options:

use the Return on Investment Ratio

do an Acid Test

work out the supplier's EBITDA

work out the supplier's gearing ratio

Answer

Explanation

Greg needs to use a gearing ratio. Gearing is a measure of how the business is being funded and is based on the ratio of debt to equity Gearing comes up a lot in the exam. Also make sure you know what Return on Investment, Acid Test and EBITDA are.

Return on Investment (ROI): How to Calculate It and What It Means (investopedia.com)

EBITDA: Definition, Calculation Formulas, History, and Criticisms (investopedia.com)

Acid-Test Ratio: Definition, Formula, and Example (investopedia.com)

Questions # 26:

Which of the following financial ratios would indicate a supplier's potential exposure risk to a steeprise in inflation?

Options:

acid test

current ratio

gross profit margin

gearing ratio

Answer

Explanation

The correct answer is 'gearing ratio'.

Gearing measures how much of a company's funding is based on long-term debt or loans- this would be affected by a steep rise in inflation. If a company has a mortgage on their offices or facto-ry and they need to remortgage and inflation has gone up a lot- they'll be paying a lot more on their mortgage. This will severely effect the gearing ratio as they'll have more outgoings than incoming.

Gross profit margin COULD be affected by inflation, for example if you've got hyper-inflation and the country goes into recession and people stop buying your product. However, this answer isn't al-ways right and depends on many factors- the industry, the product, the company etc, so for the purpose of CIPS should be discounted. There are many industries which are immune to inflation.

Questions # 27:

In order to assess whether a company is able to meet its current liabilities, which financial ratio should you use?

Options:

Return on Equity

Acid Test

Gearing Ratio

Gross Profit Margin

Answer

Explanation

"Meet current liabilities" is a posh way of saying "can you pay your bills". You're therefore looking for a liquidity ratio- a ratio that looks at assets vs liabilities (i.e. money in the bank vs money owed out). The Acid Test is a liquidity ratio. It's sometimes called the 'quick ratio'. Both terms come up on the exam. The other options are financial ratios but aren't for liquidity.

Questions # 28:

Polygon Incorporated is a new company in the mining industry, which often gets bad press due to issues of sustainability. Which of the following should Polygon Incorporated consider when developing sustainable business practices?

Options:

people, profit, planet

economic, ethical and environmental

efficiency, effectiveness, impact

fraud, bribery and corruption

Answer

Explanation

The three pillars of sustainability are profit, people and planet. This may also be referred to as social, economic and environmental.

Questions # 29:

Ji Yuan is a procurement manager who is looking for a new supplier to complete reactive maintenance activities throughout his property portfolio. The reactive maintenance will include an array of plumbing tasks as well as fixing electrical items. Suppliers therefore need to be extremely skilled and knowledgeable about a variety of tasks. Ji Yuan has done some initial research and doesn't believe that there are many suppliers who can complete this type of contract. What type of tender should he use?

Options:

negotiated

restricted

open

competitive dialogue

Answer

Explanation

Open tenders should be used when the buyer expects there to be little interest / fewer bids. The opportunity is advertised widely allowing any supplier that wishes to submit a bid the opportunity.

The other options limit the number of suppliers and Ji Yuan doesn't want to do that, because he risks getting no interest and no supplier.

P.23

Questions # 30:

Zeb is a Procurement Manager at Zig Zag Zips manufacturing. The organisation has a complex supply chain and works with 46 different suppliers, many of these international. Which of thefollow-ing would be the most useful for Zeb to address issues of Modern Slavery?

Options:

carry out regular due diligence checks on the supply base

ensure all 46 suppliers publish an Anti Slavery Statement in line with the Modern Slavery Act

work with less suppliers to reduce the risk of slavery entering the supply chain

ask all suppliers to get Fair Trade accredited

Answer

Explanation

Carry out due diligence is the correct answer. The other answers are incorrect:

- ensure all 46 suppliers publish an Anti Slavery Statement in line with the Modern Slavery Act is wrong because the question states that some suppliers are international. The legislation is UK, meaning international suppliers don't have to do the statement. It also only applies to companies with a turnover of £36m, and some of Zeb's suppliers may be smaller than this.

- work with less suppliers to reduce the risk of slavery entering the supply chain is a silly answer be-cause Zeb probably needs all of his suppliers. There's probably a reason he uses that many.

- ask all suppliers to get Fair Trade accredited is also a silly answer. Fair Trade only exists in some industries such as cocoa and bananas. Zig Zag Zips is in manufacturing so it's probably not going to be able to fairtrade accredit some of the stuff it buys.

Viewing page 3 out of 10 pages

Viewing questions 21-30 out of questions