L4M4 PDF Pass Leader, L4M4 Latest Real Test [Q71-Q89]

L4M4 CIPS

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March 31, 2025

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L4M4 PDF Pass Leader, L4M4 Latest Real Test

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CIPS L4M4 Exam Syllabus Topics:

Topic	Details
Topic 1	Understand compliance issues when sourcing from suppliers: It explores legislative, regulatory, and organizational requirements for sourcing. It compares the use of audit and other mechanism of feedback.
Topic 2	This section examines analyzing market data, obtaining quotations tenders, and assessing responses. The sub-topics focus on key processes for evaluating potential suppliers.
Topic 3	Understand the key processes that can be applied to the analysis of potential external suppliers:
Topic 4	Understand options for sourcing requirements from suppliers: This section covers the sourcing process, approaches, options, and award criteria for obtaining requirements from suppliers. The sub-topics provide a foundation for strategic sourcing.

QUESTION 71
Which of the following is not a Human Rights as protected by the UN Declaration on Human Rights?

freedom of Belief and to change beliefs

the right to be treated equally

the right to free speech

the right to change nationality

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

QUESTION 72
Which of the following would be a valid reason to make a product inhouse, rather than buy it from a supplier?

improved quality control

less inventory

killset of supplier is higher

threat of substitutions

One of the biggest advantages to making an item over buying it is ‘improved quality control’.
When you make the product yourself, you can set the quality parameters you require and aren’t re-stricted to, or dependant on, what the supplier does. The other options are incorrect- making stuff inhouse would mean you hold more inventory. If the supplier has a higher skillset than you, you would outsource. Threat of substitutions wouldn’t impact this decision.
For a list of pros and cons relating to the ‘make or buy’ decision see p.5. This is a hot topic for the exam.

QUESTION 73
Which of the following should be assessed in supplier proposals to check compliance with environmental, social, and governance (ESG) standards? Select THREE that apply.

The company’s criteria for make or buy decisions

The financial stability of the company

Procedures on intra-company trading

The company’s employee working conditions

The company’s code of ethics

The company’s policy on carbon emissions

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.

QUESTION 74
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.

Over-analyzing

Barriers

Motion

Waiting

Inventory

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.

QUESTION 75
Why would you use a credit score to appraise a supplier?

to understand the level of risk the supplier poses to your organisation

to understand if their prices reflect market value

to find out how much money the supplier has in the bank

to find out if the supplier has any unethical business practices

A credit rating generates a score which reflects ‘the level of risk an organisation poses when dealing with other businesses’. It’s saying how risky it is to loan them money or do business with them by looking at how good they are at paying people. So a high credit rating will say they’re good at paying back their loans and paying their suppliers on time. A poor credit rating will say they often miss payments or pay late.
A credit rating will not tell you how much money they have, or details on their prices. Credit scores looks at purely financial data so wouldn’t help you analyse whether their business practices are ethical or not.

QUESTION 76
If a commodity index shows that the price of a commodity is continually rising, what does this indicate about the market?

that there is little demand in the marketplace

demand is exceeding supply

there is a threat of substitution

the marketplace is a monopoly

The correct answer is ‘demand is exceeding supply’- If everyone wants to buy something, the sup-pliers will likely increase the price.
If there was little demand or there were threats of substitutions, this would likely result in a price decrease.

QUESTION 77
A company has actively included supporting of disadvantaged groups within their ESG commitment. Which of the following groups are considered disadvantaged?

endangered species

pregnant women and children

international suppliers

Muslims

Pregnant women and children are considered ‘disadvantaged’ by the UN. The other groups the UN call disadvantaged include; the elderly, the immunocompromised, those with disabilities and those living in poverty. This is the list given in the study guide.
A company could help disadvantaged groups in several ways. Firstly by offering employment (obviously not to the children). It could also include helping these groups as part of a Social Value out-come or community benefit scheme.

QUESTION 78
Which of the following financial ratios would indicate a supplier’s potential exposure risk to a steeprise in inflation?

acid test

current ratio

gross profit margin

gearing ratio

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.

QUESTION 79
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

exchange rate

total life cycle costs

tariffs

batch quantities

tax

Exchange rates and tariffs are associated with international sourcing.
The other options are concerns for both local sourcing and international sourcing.

QUESTION 80
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

innovation

on time in full deliveries

bulk discount

sustainability

cost plus pricing

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 81
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?

Yes- a low gearing ratio means the company’s finances are made up of equity rather than debt

Yes- a low gearing ratio shows that the business is solvent and can deal with supply chain disruptions easily

No- a low gearing suggests that the company is financed by long-term debt rather than equity

No- a low gearing shows you that a company isn’t likely to be profitable

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.

QUESTION 82
Which of the following factors are typically considered when assessing a supplier’s financial capacity?

The supplier’s profitability and asset levels

The price quoted in the request for quotation

The supplier’s costing methods and markup percentage

The supplier’s compliance with regulations for minimum wages

Profitability and asset levels indicate a supplier’s financial stability and ability to meet contract demands.
Responsible sourcing practices include assessing financial capacity to reduce risk in the supply chain and ensure long-term supplier viability.

QUESTION 83
Kiran is appraising some potential suppliers and has noticed that one of these suppliers has an extremely high gearing ratio. What would this suggest?

the supplier is extremely profitable

the supplier has a lot of long-term debt

the supplier has a high cost of sales

the supplier has a strong return on investment

The correct answer is ‘the supplier has a lot of long-term debt’. Gearing is a measure of how the business is being funded and looks at the ratio of debt to equity. For example if they have taken out lots of loans and mortgages, this would equate to a lot of debt which means a poor gearing ratio.
Gearing is a hot topic for the exam.

QUESTION 84
Raja is a procurement manager who is keen to gain further insight into the current marketplace and whether local suppliers are capable to provide a service he is looking to procure. He wishes to test the market before he begins a formal tender process. What should Raja do?

send out a RFI

send out a RFQ

speak with his current suppliers

conduct an open competition

Raja should send out a RFI- request for information; this will allow him to gain feedback from the marketplace prior to tender.
Speaking only with current suppliers will not provide all the information Raja requires.
He should not send out a request for quotation since he is still conducting market research An open competition would be how he can procure, after he’s completed his research

QUESTION 85
How can a buyer monitor a supplier’s ethical workforce standards throughout a long-term contract?

Check the International Labour Organisation’s database regularly for information specifically about that supplier

Request a completed self-assessment by the supplier on a monthly basis

Commission periodic audits by specialist third parties to highlight any malpractice

Contact management directly on a periodic basis, as stipulated in contract terms

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.

QUESTION 86
Which of the following items would you expect to find on a balance sheet? Select THREE

current assets

current liabilities

net product sales

stockholders’ equity

gross product sales

current assets, current liabilities and equity can be found on a balance sheet. Net and gross sales will be found on a profit and loss account.

QUESTION 87
Ramesh is an IT category manager within the UK’s National Health Service and is responsible for the procurement of a new high-value network system, which will spread across multiple doctors’ practices and community health centres. Ramesh has reviewed different tender approaches and concluded that the use of a restricted tender is the most appropriate. Which of the following statements is true for a restricted tender process?

Direct negotiations occur prior to suppliers submitting their offer

The contract will be awarded strictly on pricing criteria

Suppliers responding to the tender are pre-qualified

It is only relevant when there are few suppliers in the market

In a restricted tender process, only pre-qualified suppliers are invited to bid, ensuring that participating suppliers have met necessary qualifications. This approach helps in managing high-value contracts by focusing on capable suppliers. Ethical and responsible sourcing in the public sector demands supplier pre- qualification to ensure compliance, transparency, and quality.

QUESTION 88
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?

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

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

The supplier will have cash reserves to cover unexpected expenses

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

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 89
An organisation is keep to include Social Outcomes in it’s assessment for Value for Money for a new tender.
Which of the following should be considered?

use of local labour to deliver the contract

CO2 emissions of the supplier’s delivery vehicles

supplier’s ESG policy

accreditations such as Fair Trade

Social value is about benefitting the local community / society. Therefore of those options listed, use of local labour is the most appropriate to consider.

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