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CIPS L4M4 Exam Syllabus Topics:
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NEW QUESTION # 141
An organisation within the European Union (EU) wants to import an item from outside of the EU. Which of the following is a valid shipping document?
- A. Single transit document
- B. Bill of lading document
- C. Goods inward document
- D. Purchase order document
Answer: B
Explanation:
A Bill of Lading is a critical shipping document in international trade, serving as a receipt for shipped goods and a contract between the shipper and carrier. It is essential for customs clearance and is recognized as a valid document for importing goods into the EU.
Exact Extract from Study Guide:
"The Bill of Lading (B/L) is a document issued by the shipping company to the operating shipper, which acknowledges that the goods have been received on board."
NEW QUESTION # 142
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 make sure 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?
- A. Acid test
- B. Gearing ratio
- C. Annual turnover
- D. Profit and loss account
Answer: A
Explanation:
The acid test, also known as the quick ratio, measures a company's ability to cover its current liabilities with its most liquid assets, excluding inventory. It is a stringent indicator of short-term financial health. By requesting this ratio, the company can assess whether a potential supplier has sufficient liquidity to meet its obligations, which is crucial when procuring strategic items.
Reference:
CIPS Level 4 Diploma in Procurement and Supply, L4M4 Study Guide, Section 2.3: Financial Appraisal of Suppliers
NEW QUESTION # 143
A buyer is assessing a supplier's proposal in terms of any added value offered. Which of the following are examples of added value?
* The supplier has submitted the lowest price compared to competitors
* The supplier is offering solutions to reduce costs in the supply chain
* The supplier is committed to reducing plastic and waste in operations
* The supplier is personally known by the Operations Director
- A. 1 and 3
- B. 3 and 4
- C. 2 and 3
- D. 1 and 4
Answer: C
Explanation:
Added value refers to benefits beyond basic price and compliance. Examples include suppliers proposing innovations or cost-reduction strategies in the supply chain (2) and sustainability commitments like reducing plastics and waste (3). Lowest price is part of baseline evaluation, not added value. Personal connections (4) are not a valid or ethical procurement criterion and could breach fairness. Responsible sourcing emphasises identifying suppliers who contribute to continuous improvement, sustainability, and efficiency beyond contractual minimums.
Reference: CIPS L4M4 Study Guide (v2), LO: "Implementation" - evaluating added value in supplier proposals.
NEW QUESTION # 144
A buyer has been working with managers on a tender and is now assessing supplier proposals. Is it good practice for the procurement buyer to make sourcing recommendations?
- A. No, it is a lengthy and unnecessary step for the procurement buyer
- B. Yes, the procurement buyer should decide independently to avoid conflict of interest
- C. No, the buyer's recommendations are not relevant; only managers decide
- D. Yes, the procurement buyer can advise on the proposals, but decisions should involve business managers
Answer: D
Explanation:
Good governance in procurement requires collaboration. The buyer provides expertise in sourcing methods, evaluation, and compliance with procurement rules, but decisions should also involve business managers who understand operational needs. Acting independently could cause conflict and undermine accountability.
Conversely, leaving all decisions to managers risks bypassing procurement expertise. The best practice is for procurement to advise and recommend, while engaging stakeholders in final award decisions, ensuring transparency, fairness, and shared accountability. This balances compliance with ethical sourcing requirements and operational business needs.
Reference: CIPS L4M4 Study Guide (v2), LO: "Implementation" - roles and responsibilities in procurement governance.
NEW QUESTION # 145
How can a buyer monitor a supplier's ethical workforce standards throughout a long-term contract?
- A. Request a completed self-assessment by the supplier on a monthly basis
- B. Check the International Labour Organisation's database regularly for information specifically about that supplier
- C. Contact management directly on a periodic basis, as stipulated in contract terms
- D. Commission periodic audits by specialist third parties to highlight any malpractice
Answer: D
Explanation:
Conducting periodic audits by third-party specialists is a reliable way to monitor compliance with ethical standards, as these audits provide an objective assessment. This aligns with ethical sourcing practices, as it promotes accountability and ensures continuous adherence to agreed-upon standards.
NEW QUESTION # 146
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 selectingthe most appropriate supplier. How should Eamon appraise the bids?
- A. organise a cross-functional team of procurement personnel as they will have experience in assessing price and quality of bids
- B. evaluate the bids himself as this is a complex requirement
- C. evaluate the bids himself as this is a strategic purchase
- D. organise a cross-functional team to assess the bids as people from other departments may have important information and experience of yoyos
Answer: D
Explanation:
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.
NEW QUESTION # 147
One of the typical selection criteria applied in determining the right supplier is 'technical capabilities', which might include ...
- A. The supplier's brand name is highly reputed for being associated with the Ethical Trading Initiative
- B. The supplier's financial ratios, revealing that they are very highly geared
- C. The supplier's ability to produce all required quantities and maintain contingency stocks
- D. The supplier's ability to keep its plant and machinery in a high state of repair and maintenance
Answer: C
Explanation:
Technical capability focuses on the capacity to meet specification, volume, and reliability (including contingency). While maintenance is relevant, the clearest indicator among these options is the proven ability to deliver required quantities and hold contingency stock. Financial gearing and reputational associations are separate selection dimensions (financial/ethical).
Reference: CIPS L4M4 Study Guide (v2): LO "Implementation" - supplier selection criteria (technical capability, capacity, quality, ethical credentials).
NEW QUESTION # 148
Which of the following are considerations when evaluating quality as a criterion for supplier selection? Select TWO that apply.
- A. The existence of policies and initiatives toward more sustainable packaging and materials
- B. Certification to the management system ISO 14001
- C. Certification to the management system ISO 9001
- D. The supplier's environmental impact analysis
- E. The existence of Total Quality Management (TQM) and a continuous improvement culture
Answer: C,E
Explanation:
Total Quality Management (TQM) practices and ISO 9001 certification are indicators of a supplier's commitment to quality. Responsible sourcing evaluates these factors to ensure suppliers meet high-quality standards and continuous improvement expectations.
NEW QUESTION # 149
Which of the following payment mechanisms is most beneficial to the supplier?
- A. open account
- B. letter of credit
- C. sight draft
- D. cash in advance
Answer: D
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.
NEW QUESTION # 150
Foresttors Plc is negotiating a new contract for the procurement of timber, a crucial component of its production operations. The company has incorporated environmental, social, and governance (ESG) reporting requirements into the contractual terms. Is this a valid approach?
- A. No. ESG is not within the scope of a contractual document and should always be treated informally
- B. Yes. This helps to demonstrate the importance of compliance with ESG
- C. Yes, providing the contract does not require a supplier to do anything differently for ESG than they have done previously
- D. No. Suppliers cannot be legally responsible for ESG compliance; this should be the buying organisation
Answer: B
Explanation:
Embedding ESG/ethical clauses and reporting in contracts is a key mechanism to implement responsible sourcing, set clear expectations, and enable monitoring and remedies. Suppliers can be held to contractual ESG obligations where these are defined and agreed.
Reference: CIPS L4M4 Study Guide (v2): LO "Implementation" - contractual clauses for ethics/ESG, monitoring and enforcement.
NEW QUESTION # 151
A company has a low gearing of 20%. This shows that the company relies on equity capital and should therefore have less difficulty coping during tough economic times. Is this statement TRUE?
- A. No- a low gearing suggests that the company is financed by long-term debt rather than equity
- B. Yes- a low gearing ratio shows that the business is solvent and can deal with supply chain disruptions easily
- C. No- a low gearing shows you that a company isn't likely to be profitable
- D. Yes- a low gearing ratio means the company's finances are made up of equity rather than debt
Answer: D
Explanation:
the correct answer is 'Yes- a low gearing ratio means the company's finances are made up of equity rather than debt'.
Remember low gearing = good (based on equity), high gearing = bad (based on debt). Anything over 50% is considered high.
The two no answers are therefore incorrect and you can discount these straight away. The other yes answer is one of those answers which COULD be true, but isn't always true, and we'd need more information to know for sure. When you get options like this there will be one that is always right and one which is sometimes right - so always pick the always right one.
Dealing with supply chain disruptions is complex, and depending what the disruption is, how big it is, what the industry is etc determines whether a supplier can handle it or not. Because there's more factors to consider than just gearing, this isn't the right answer.
NEW QUESTION # 152
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?
- A. Acid test
- B. Gearing ratio
- C. Annual turnover
- D. Profit and loss account
Answer: A
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.
NEW QUESTION # 153
Which of the following financial ratios would indicate a supplier's potential exposure risk to a steep rise in inflation?
- A. current ratio
- B. acid test
- C. gross profit margin
- D. gearing ratio
Answer: D
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.
NEW QUESTION # 154
A buyer has been working with their business managers on a tender. The buyer is now assessing the tender proposals from the external market. Is it good practice for the procurement buyer to makesourcing recommendations?
- A. No, the buyer's recommendations are not relevant to the final sourcing decision, which must be taken by the business managers
- B. Yes, the procurement buyer can advise on the competitive proposal but should engage with the business managers about the decision to award the tender
- C. Yes, the procurement buyer should assess and take all decisions to award the tender independently of the business managers to avoid conflict of interest
- D. No, it is a lengthy, costly, and unnecessary step for the procurement buyer to engage business managers
Answer: B
Explanation:
Engaging with business managers while making sourcing recommendations ensures that the buyer considers multiple perspectives, reducing potential biases and improving decision-making. This approach aligns with ethical sourcing practices by promoting collaboration and transparency in tender decisions.
NEW QUESTION # 155
According to the CIPS code of conduct, which laws should a procurement professional adhere to?
- A. all international procurement legislation
- B. all laws published by international organisations such as ILO
- C. all laws within the country they work in
- D. all laws within countries they have business and contracts in
Answer: D
Explanation:
The CIPS Code of Conduct says to adhere to all laws of countries in which I practice. So if you're in the UK and procure stuff from China, you need to abide by both UK and Chinese laws, not just UK laws.
There's no international procurement laws- these are all different for different countries.
ILO doesn't publish laws.
NEW QUESTION # 156
A company's balance sheet will show you which of the following?
- A. cash coming in and out of the business
- B. revenue, profit and expenses
- C. profit, loss and assets
- D. equity, assets and liabilities
Answer: D
Explanation:
a balance sheet shows 'equity, assets and liabilities'. The other financial statements you need to know for this exam are cash flow statements and and income statements.
If you're not familiar with these three I strongly recommend you do some further reading on this before the exam if you can. This is helpful: How the 3 Financial Statements are Linked Together - Step by Step (corporatefinanceinstitute.com)
NEW QUESTION # 157
Which of the following is not a Human Rights as protected by the UN Declaration on Human Rights?
- A. the right to free speech
- B. the right to change nationality
- C. the right to be treated equally
- D. freedom of Belief and to change beliefs
Answer: B
Explanation:
the right to change nationality is not included in the UN Declaration of Human Rights. There are 30 in total but you're not expected to know them all. You should know the big ones though which are; life, security, belief, equal treatment, free speech and expression. A summary can be found here: Universal Declaration of Human Rights | United Nations
NEW QUESTION # 158
What are the risks of outsourcing?
* Loss of control of a project
* Loss of assets
* Loss of future business opportunities
* Loss of private information
- A. 1 and 2 only
- B. 3 and 4 only
- C. 2 and 3 only
- D. 1 and 4 only
Answer: D
Explanation:
Outsourcing can lead to a loss of control over certain aspects of a project, as the organization relies on external parties to deliver services or products. Additionally, sharing sensitive information with third-party vendors increases the risk of data breaches or loss of private information. While there may be concerns about assets or future business opportunities, the primary risks in outsourcingrelate to control and information security.
Reference:
CIPS Level 4 Diploma in Procurement and Supply, L4M4 Study Guide, Section 3.2: Risks Associated with Outsourcing
NEW QUESTION # 159
A procurement manager suggests implementing an ISO environmental standard to improve procurement practices. Some colleagues worry about complexity and resistance. Should the company proceed?
- A. No, ISO standards are too complex for staff and suppliers
- B. Yes, as it would align with and help to achieve sustainability goals
- C. Yes, implementation would guarantee compliance with environmental laws
- D. No, because ISO standards are only relevant to large organisations
Answer: B
Explanation:
ISO environmental standards (e.g., ISO 14001) provide a structured framework for managing environmental responsibilities. They support sustainability goals by embedding continual improvement, legal compliance, and stakeholder trust. They are relevant to organisations of all sizes and sectors, not just large firms. While they do not automatically guarantee compliance, they enhance systematic control, training, and supplier engagement. Resistance and complexity can be overcome with phased implementation and awareness- building. CIPS emphasises that adoption of recognised standards demonstrates responsible sourcing, aligns with CSR strategies, and reassures stakeholders about commitment to sustainability.
Reference: CIPS L4M4 Study Guide (v2), LO: "Concepts" - standards, sustainability frameworks, ISO principles.
NEW QUESTION # 160
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
- A. cultural differences
- B. export tariffs
- C. shortened lead times
- D. ethical behavior
- E. currency exchange fluctuations
Answer: A,D,E
Explanation:
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.
NEW QUESTION # 161
Amnesty International, Oxfam and CIPS are examples of what type of organisation?
- A. public limited companies
- B. limited liability
- C. not-for-profit
- D. partnerships
Answer: C
Explanation:
These are 'not-for-profit' organisations. You don't need to know much on not-for-profit procurement for this exam. Just that procurement can be regulated in this sector by bodies such as Charities Commission.
NEW QUESTION # 162
Which of the following is a strategic cost associated with outsourcing cyber-security from an in-house IT function to a specialist supplier?
- A. Loss of influence over prioritisation of tasks
- B. Loss of informal relationship with cyber experts
- C. Loss of financial resources due to regulation
- D. Loss of expertise within business
Answer: D
Explanation:
Outsourcing critical functions like cybersecurity can lead to a loss of in-house expertise, which is a strategic cost. This loss may impact the organization's ability to respond swiftly to security threats, innovate, and maintain control over sensitive operations. Retaining core competencies is vital for sustaining competitive advantage and ensuring long-term resilience.
Exact Extract from Study Guide:
"Outsourcing core activities risks - loss of in-house skill, loss of key staff to competitors, risk that supplier cannot be found, loss of control over operating activities, risk of loss of control over confidential information
/IP.
NEW QUESTION # 163
Ramesh is a procurement manager who is looking at his supplier base. He is pursuing a sourcing strategy with the aim of enabling logistical cost reductions. He has made the decision to scale-down his supplier base and purchase from one supplier.
Which type of sourcing arrangement has Ramesh began?
- A. dual
- B. multiple
- C. sole
- D. single
Answer: D
NEW QUESTION # 164
A procurement manager has decided to use a local newspaper to source quotes from external suppliers. Why is it important to advertise tenders? Select TWO that apply.
- A. To gain tactical sourcing
- B. To gain green procurement
- C. To gain value for money
- D. To gain insights from the market
- E. To avoid complex bids
Answer: A,C,D,E
Explanation:
Advertising tenders is crucial for achieving value for money by encouraging competitive bids, which can lead to better pricing and service offerings. It also provides insights into the market by revealing the capabilities and innovations of various suppliers, aiding in informed decision-making.
Exact Extract from Study Guide:
"Inviting suppliers to take part in a competitive tender may reduce the potential for the biased selection of a supplier. Time, money and resource could be saved..."
NEW QUESTION # 165
Which of the following should be assessed in supplier proposals to check compliance with environmental, social, and governance (ESG) standards? Select THREE that apply.
- A. The company's criteria for make or buy decisions
- B. The company's employee working conditions
- C. Procedures on intra-company trading
- D. The company's code of ethics
- E. The financial stability of the company
- F. The company's policy on carbon emissions
Answer: B,D,F
Explanation:
Employee working conditions, a code of ethics, and a carbon emissions policy are all indicative of a supplier's commitment to ESG standards. Assessing these factors aligns with responsible sourcing practices, which prioritize sustainability and ethical considerations.
NEW QUESTION # 166
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