L4M4 Sample paper Flashcards
Q1. Which of the following is an effective measure for a procurement manager to identify potential risks in
relation to a supplier’s exposure to increases in interest rates?
a. Acid test
b. Gearing
c. Inventory days
d. Turnover
B
Q2. A procurement organisation has a complex and very high spend requirement for a widget. It has many
potential suppliers, all with the capacity and eagerness to deliver the contract. Once awarded, the contract
can be easily switched to an alternative source of supply. Price is just one consideration, but other more
qualitative factors are also important in deciding which supplier to award the contract to.
Which of the following describes the sourcing characteristics of the widget and provides the best method of
awarding the contract?
a. Leverage and competitive tender
b. Strategic and e-auction
c. Routine and supplier negotiations
d. Bottleneck and framework agreement
Correct answer: A
Q3. Which of the following is the most useful to assess a supplier’s liquidity?
a. Current ratio
b. Earnings per share
c. Profit margin
d. Return on equity
Correct answer: A
Q4. Which ONE of the following INCOTERMS 2020 applies to any form of transportation and carries the
highest risk profile for the buyer?
a. Free on board (FOB)
b. Delivered duty paid (DDP)
c. Ex-works (ExW)
d. Cost insurance and freight (CIF)
Correct answer: C
Q5. A major public sector organisation has a requirement to award a high value services contract.
Procurement for the public sector is highly regulated. The organisation has a clear specification and has
already conducted a market analysis, identifying many potential suppliers that could deliver the contract. It is
an important contract but the requirement is not urgent. The most important factor for the organisation is to
find the best supplier.
When considering all of these factors which ONE of the following approaches is the
most appropriate?
a. Direct award
b. Restricted tendering
c. Negotiated procedure
d. Competitive dialogue
Correct answer: B
Q6. Hi-Tech Products Inc (HTPI) has developed a new product. The patent for the product has been registered
worldwide. HTPI has identified target customers and potential distributors for the product to be sold around
the world. HTPI realises that profit margins will be tight and so finding the best suppliers will be key. HTPI is
open to ideas in terms of production processes and is keen to learn more from the supply market, before
running a formal competition.
Which ONE of the following should HTPI conduct as a priority?
a. Competitive negotiation
b. Invitation to tender
c. Request for information
d. Supplier appraisal
Correct answer: C
Q7. Which of the following items found in a supplier’s financial statements are relevant to the gearing ratio?
- Long-term debt
- Opening inventory
- Short-term investments
- Shareholder’s equity
a. 1 and 3 only
b. 2 and 4 only
c. 2 and 3 only
d. 1 and 4 only
Correct answer: D
Q8. A supplier’s credit rating is a relevant selection criterion when running a competitive tender. Is this
statement TRUE?
a. Yes, because credit rating will impact on the brand
b. Yes, because the credit rating outlines the financial stability of the supplier
c. No, because credit ratings are unreliable
d. No, because credit ratings should be undertaken after selection
Correct answer: B
Q9. Which of the following are examples of secondary data that might be useful to understand the market
when sourcing?
Select the TWO that apply.
a. Government reports
b. Supplier websites
c. Focus groups
d. Online surveys
e. Customer questionnaires
Correct answer: A & B
Q10. Which of the following should be considered when calculating ratios relating to a supplier’s liquidity?
Select TWO that apply.
a. Receivables
b. Equity
c. Reserves
d. Profit
e. Inventories
Correct answer: A & E
Q11. Which of the following INCOTERMS 2020 carries the lowest risk for the buyer and highest risk for the
Supplier?
a. Delivered duty paid
b. Free on board
c. Ex-works
d. Delivered at terminal
Correct answer: A
Q12. If a procurement professional believes that there are suspiciously low labour rates being used within
their supply chain, this should raise concerns about which ONE of the following?
a. Bribery
b. Modern slavery
c. Fraudulent behaviour
d. Corruption
Correct answer: B
Q13. A large organisation is running a competitive tendering exercise that will lead to the award of a major
contract. Bidders are required to submit extensive personal information about key staff who will be involved
in the delivery of a long-term contract.
What will be the most important legislative consideration for the
procurement organisation throughout the tendering process?
a. Product liability
b. Discrimination
c. Health and safety
d. Data protection
Correct answer: D
Q14. The procurement manager (PM) for Middletown Council has been asked to procure some new refuse
containers for households to dispose of food waste. The council have advised there should be one container
per household and that the first order will be for 50,000 units. The specification has been agreed, however,
the PM wants to know the longer-term demand in order to explore economies of scale. The PM reviews the
latest government census records for Middletown to start establishing the potential size of the requirement.
This is an example of what data?
a. Secondary
b. Internal
c. Primary
d. Unstructured
Correct answer: A
Q15. A supplier’s liquidity can be assessed using ratio analysis based on information from a supplier’s financial
statements.
You can calculate the current ratio of the supplier when comparing which of the following?
- Current assets
- Long-term debt
- Current liabilities
- Shareholders’ funds
a. 1 and 2 only
b. 2 and 3 only
c. 3 and 4 only
d. 1 and 3 only
Correct answer: D
