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NEW QUESTION # 18
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. evaluate the bids himself as this is a strategic purchase
- B. organise a cross-functional team of procurement personnel as they will have experience in assessing price and quality of bids
- C. evaluate the bids himself as this is a complex requirement
- 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 # 19
Which of the following should be considered when calculating ratios relating to a supplier's liquidity?
- A. profit
- B. inventory
- C. reserves
- D. receivables
Answer: B
NEW QUESTION # 20
Which of the following are primary sources of data? Select TWO.
- A. market reasearch commissioned by a rival company
- B. trade fairs and exibits
- C. economic indices such as PPI or CPI
- D. published price lists
- E. phone calls with current suppliers
Answer: B,E
Explanation:
Primary data includes trade fairs and exhibits, and phone calls to current suppliers. The others are examples of secondary data.
Remember primary= you do it yourself, Secondary = someone else did it.
NEW QUESTION # 21
When looking at credit scores, a supplier may be classified as a high risk for reasons that are not linked to poor credit. Which of the following could these be? Select TWO
- A. The organisation is new
- B. The organisation has lots of fixed assets
- C. The organisation has no loans or credit cards
- D. The organisation does not employ many people
Answer: B,C
Explanation:
New organisations or those with no loans/ credit cards may have low credit scores. This is simply because they do not have enough financial history to make their scores good. That means banks au-tomatically class them as higher risk, because they simply don't know that they're trustworthy yet.
NEW QUESTION # 22
Which of the following items would you expect to find on a balance sheet? Select THREE
- A. current assets
- B. current liabilities
- C. net product sales
- D. stockholders' equity
- E. gross product sales
Answer: A,B,D
Explanation:
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.
NEW QUESTION # 23
ABC Ltd works with supplier XYZ Ltd who uses a variety of subcontractors. ABC has recently learned of an ethical breach being committed by one of XYZ's subcontractors. What should ABC do?
- A. Research alternative suppliers
- B. Terminate the contract
- C. Seek compensation
- D. Recommend remedial action
Answer: D
Explanation:
ABC should do a 'root cause analysis' to find out where the issue has come about, and why. From there, once they know what the breach is and how serious it is, they can suggest corrective action.
They can't jump straight to terminating the contract or seeking damages as it's not the supplier itself but rather the subcontractor. Also that would be really hasty considering we don't know what the issue is and what the market conditions are like. That supplier may be the only one who can provide the product. We also don't know if the supplier knows about the issue themselves.
NEW QUESTION # 24
Which of the following financial ratios would indicate a supplier's potential exposure risk to a steep rise in inflation?
- A. gearing ratio
- B. acid test
- C. gross profit margin
- D. current ratio
Answer: A
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 # 25
Why would you use a credit score to appraise a supplier?
- A. to understand if their prices reflect market value
- B. to find out if the supplier has any unethical business practices
- C. to find out how much money the supplier has in the bank
- D. to understand the level of risk the supplier poses to your organisation
Answer: D
Explanation:
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.
NEW QUESTION # 26
Which of the following would you use to work out a company's gearing ratio? Select TWO.
0current liabilities
- A. net profit
- B. shareholder equity
- C. long term debt
- D. gross sales
Answer: A,C
Explanation:
Gearing measures how much of an organisation's long-term funding is made up of long term debt and loans.
Therefore the correct answers are 'shareholder equity' and 'long term debt'.
There are many question about financial ratios that can come up 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 they're really good at explaining things to beginners) Gearing Ratio explained (youtube.com)
NEW QUESTION # 27
Which of the following are considerations when evaluating quality as a criterion for supplier selection? Select TWO that apply.
- A. Certification to the management system ISO 9001
- B. The existence of Total Quality Management (TQM) and a continuous improvement culture
- C. Certification to the management system ISO 14001
- D. The supplier's environmental impact analysis
- E. The existence of policies and initiatives toward more sustainable packaging and materials
Answer: A,B
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 # 28
What is a major benefit to using Incoterms when sourcing goods internationally?
- A. it replaces the need for insurance
- B. it ensures ethical business practices
- C. it ensures value for money
- D. it replaces lengthy contractual clauses
Answer: D
Explanation:
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.
NEW QUESTION # 29
When selecting a supplier on technical merit, its important that the supplier is a good 'functional fit' for the organisation. What is meant by 'functional fit'?
- A. the supplier makes a similar profit to that of the buyer
- B. the supplier is able to adhere to the same ethical standards
- C. the supplier is able to work at the same technical level as the buyer
- D. the supplier shares a common supply chain
Answer: C
Explanation:
The correct answer is 'the supplier is able to work at the same technical level as the buyer'. It's aboutbeing able to integrate the businesses together in terms of IT systems and such like.
NEW QUESTION # 30
When evaluating a supplier's proposal in relation to ESC (Environmental, Social, Governance, and ethical elements), it is common to send questionnaires to suppliers requesting information, which can later be scored.
Which of the following questions would be assessing any of the ESC criteria?
* Could you provide details on your manufacturing and raw material costs as part of an open-book pricing contract?
* How do you promote equal opportunity for your employees, customers, and suppliers?
* What is the annual turnover and profitability of your company?
* Does your company have an anti-bribery policy?
- A. 2 and 3
- B. 2 and 4
- C. 1 and 4
- D. 1 and 3
Answer: B
Explanation:
Questions about equal opportunity and anti-bribery policies assess the supplier's commitment to social and ethical standards. These aspects are part of the ESC criteria, which align with responsible sourcing practices by ensuring suppliers maintain ethical workforce practices and governance.
NEW QUESTION # 31
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?
- A. people, profit, planet
- B. efficiency, effectiveness, impact
- C. economic, ethical and environmental
- D. fraud, bribery and corruption
Answer: A
Explanation:
The three pillars of sustainability are profit, people and planet. This may also be referred to as social, economic and environmental.
NEW QUESTION # 32
A buyer is only interested in working with suppliers who have strong Environmental and Social Governance practices. It is therefore using ethical criteria as supplier selection stage to determine which suppliers to work with. Which of the following statements is true?
- A. compliance with Codes of Conduct from professional bodies is mandatory
- B. the buyer should ask suppliers to be accredited to ISO9001
a supplier who follows the CIPS Code of Conduct is more likely to meet the buyer's needs - C. ethical behaviour is impossible to determine as issues such as Modern Slavery often go undetected
Answer: B
Explanation:
A supplier who follows the CIPS Code of Conduct is more likely to meet the buyer's needs is the correct answer.
The other options are wrong:
1) Compliance with Codes of Conduct from professional bodies is optional. E.g. CIPS - no organi-sation is forced to comply with CIPS.
2) Unethical behaviour is not impossible to detect, it may be difficult but with correct due diligence and things like audits it's completely possible
3) ISO 14001 is quality management so is irelevent.
NEW QUESTION # 33
Ivan is an investor who is looking to invest in new businesses. He is reviewing several companies and working out what his equity would be. Which of the following does Ivan need to know tocalculate shareholder equity? Select TWO.
- A. net profit
- B. net income
- C. total assets
- D. total liabilities
Answer: C,D
Explanation:
Shareholder Equity = Total Assets - Total Liabilities
NEW QUESTION # 34
If a company is described as 'liquid' what does this mean?
- A. the company is funded on equity rather than debt
- B. the company spends a lot of money
- C. the company is highly profitable
- D. the company has enough money to pay short-term liabilities
Answer: D
Explanation:
liquid = the ability to pay short and medium term debts. In simple terms do you have more in stuff (money, assets) than you owe in debt?
Understanding Liquidity and How to Measure It (investopedia.com)
This is a hot topic for the exam. Learn everything in this section.
NEW QUESTION # 35
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. multiple
- B. single
- C. sole
- D. dual
Answer: B
NEW QUESTION # 36
For complex and high value tenders, which document is the most appropriate to send to those suppliers who have already been appraised and deemed suitable?
- A. ITT
- B. PQQ
- C. RFT
- D. RFQ
Answer: A
Explanation:
The correct answer is Invitation to Tender. This is sent out to suitable suppliers inviting them to bidfor the opportunity.
A PQQ - pre-qualification questions naire- is sent to suppliers to see if they are suitable. The question states these suppliers have already been deemed suitable, so they've already passed PQQ A RFQ - request for quotation- would be used when the only variable is price, so is not suitable for complex tenders.
RFT isn't a thing. I made the last one up.
NEW QUESTION # 37
Curly Cake Incorporated makes lots of different types of confectionary items. Although they are most famous for their cakes, they also have a smaller line of cereal bars and biscuits. Which of the following would be the most appropriate items for Curly Cake Incorporated to outsource? Select TWO
- A. cakes
- B. cleaning
- C. cereal bars and biscuits
- D. facilities management
Answer: B,D
Explanation:
Cleaning and Facilities Management are the most appropriate items to outsource. They would not outsource the making of confectionary products as this is the 'core' business.
See p.4 for "what is outsourcing?"
NEW QUESTION # 38
Procurement professionals should never appoint any suppliers that have a low credit rating. Is this statement TRUE?
- A. Yes, because this rating means that insolvency or liquidation is imminent
- B. No, because a credit rating is not an appropriate decision-making tool
- C. Yes, because this rating indicates poor financial management practices
- D. No, because a credit rating is only one financial tool to be used in determining financial competence
Answer: D
Explanation:
A credit rating is one of many tools used to assess a supplier's financial health. Responsible sourcing requires a comprehensive assessment of suppliers, considering multiple factors, to ensure a balanced and ethical approach to supplier selection.
NEW QUESTION # 39
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