Free CIPS L4M4 Practice Exam with Questions & Answers | Set: 3

Explanation

The Pareto Principle can be used when considering changing a supplier. It helps to categories suppliers by how strategically important the item is that they provide to the business.

Informing suppliers of non-conformances and improvement opportunities supports responsible sourcing by promoting continuous improvement. Preparing a report for supplier review also aligns with transparency and collaborative improvement, integral to ethical sourcing standards.

The Pareto principle (80/20) shows that around 80% of spend is often concentrated with 20% of suppliers. It is relevant for identifying strategic suppliers (D) that require close management and opportunities to improve or change relationships (E) for greater value. Contract expiry dates (B) and payment frequency (A) are administrative details, not Pareto analysis outputs. Cost variation (C) relates to performance analysis, not spend concentration. Responsible sourcing uses Pareto analysis to allocate resources effectively, focusing attention on the most impactful supplier relationships.

Explanation

This is a facilitation payment. It's when a sum of money is given for 'helping to facilitate' a contract. E.g. a procurement manager may accept a facilitation payment from a supplier for selecting him to be a new supplier for a big contract.

In the UK this is definitely considered a bribe. It's also against the CIPS Code of Conflict

Explanation

EBITDA stands for 'earnings before interest, tax, depreciation and amortization'. This is a profitability ratio and would show how profitable a business is.

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

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.

Explanation

The correct answer is current assets and current liabilities. There are many Questions about financial ratios 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 it's a great way to explain liquidity) Liquidity ratios (youtube.com)

You can be asked to work out liquidity in the exam. If you are asked this, the numbers will be very simple to the point you may be able to do the sums in your head. There is also a calculator on the test app you can use.

Multiple sourcing is particularly advantageous for ensuring quick delivery and preventing stock-outs, as it provides the flexibility to source from multiple suppliers. This approach aligns with responsible sourcing by ensuring continuity and reducing risks in the supply chain.

Explanation

This is tariffs. Be careful not to confuse tariffs and duties;

tariffs = rules and duties = payments.

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."