L4M4 Ethical and Responsible Sourcing Questions and Answers

Explanation

The correct answer is 'yes - these can be completed without warning which would give Ali an accurate picture of the supplier's operations'. The other options are incorrect:

1) you can do many types of audit- financial, ethical, Health and Safety etc

2) asking a supplier about their ethical practices isn't likely going to get you accurate information. They'll just tell you what they think you want to hear

3) audits are great- but they don't ALWAYS uncover issues. Always is the key word in that sentence which makes it incorrect.

Explanation

Completing Due Diligence checks will help guard against concerns about unethical business practices.

Not all companies will have a published Anti-Slavery policy- this is only required for large companies.

Known suppliers might have issues that you don't know about so you should always do due-diligence checks on everyone you work with

Formal tenders won't sort out ethical issues unless specifically addressed within the tender and strong contract management is put in place afterwards.

Explanation

cost and freight is specific to transport over water. The others relate to all types of transportation. Incoterms_2020_chart | Intersped

Some students report a lot of questions on Incoterms in the exam, some say they only had 1. It real-ly is luck of the draw.

Liquidity ratios (e.g., current ratio, quick ratio) measure whether a company can cover short-term debts with liquid assets like cash, receivables, and inventory. These ratios provide insight into a supplier’s ability to remain operational without defaulting on immediate obligations. Profitability ratios show long-term returns; EPS and dividends per share apply to shareholders, not supply continuity. Responsible sourcing emphasises liquidity as a key measure of supplier stability, as poor liquidity can cause supply interruptions or business failure, jeopardising contracts and buyer obligations.

Explanation

"yes- ethics and sustainability form part of 'value for money' " is the correct answer.

There are several factors that represent value for money and these are listed on p.3. These include; price, delivery, quality, ethics, sustainability and availability.

Governance of ethical and sustainable behaviours involves monitoring risk coverage and transparency measures. Reviewing insurance clauses (1) ensures suppliers are prepared to cover liabilities responsibly. Checking conflict of interest registers (3) promotes transparency, reducing risks of corruption or unfair influence. Simply reviewing NDAs (4) or updated policies (2) does not provide direct assurance of ethical and sustainable practices. Responsible sourcing requires robust governance mechanisms that ensure supplier compliance, reduce risk, and maintain ethical integrity across the supply chain.

Multi-sourcing allows organisations to diversify their supply base, providing flexibility, and reducing risk by having multiple suppliers. It is an effective strategy to prevent over-dependence on a single source and allows for competition among suppliers, promoting quality and ethical standards in the supply chain.

Incorporating ESG requirements into contractual terms is a valid and increasingly common approach. It ensures that suppliers are contractually obligated to adhere to specific environmental, social, and governance standards, aligning with the buyer's commitment to responsible sourcing. This practice not only promotes ethical behavior but also mitigates risks associated with non-compliance, such as reputational damage or legal penalties.

Exact Extract from Study Guide:

"This unit focuses on responsible procurement practices, ensuring that sourcing decisions align with legal, environmental, and social governance (ESG) principles."

Payment history and financial stress scores provide insights into a supplier’s financial health and stability. This information is crucial for procurement professionals in assessing whether a supplier can fulfill long-term commitments, supporting responsible sourcing by mitigating financial risks.

Local anti-corruption laws (A) provide insight into the legal framework and enforcement environment, while Transparency International (B) publishes the Corruption Perceptions Index and reports on bribery risks worldwide. These are reliable sources for assessing corruption levels and associated risks. UNSDGs set broad sustainability goals but not country-specific corruption risks. The ICC deals with arbitration, not anti-bribery. ISO standards provide frameworks for compliance but do not analyse country risk. Responsible sourcing requires due diligence on governance environments to mitigate bribery risks and comply with anti-corruption legislation such as the UK Bribery Act.

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.

Providing a debrief allows suppliers to understand the tender process and learn areas of improvement, promoting transparency. This practice supports responsible sourcing by fostering a fair, competitive environment and encouraging suppliers to improve their future offerings.

Explanation

Request for Quotations can include more details than just prices. They can include specs and technical drawings and samples. It's like saying 'we can give you this price with these conditions'.

The other no answer is wrong because RfQ don't always include samples. A sample wouldn't be possible for a quote for an IT consultancy piece of work.

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 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.

Incorporating recognized standards into procurement specifications provides clear guidelines for suppliers, reducing ambiguity and ensuring that products or services meet predefined quality and safety criteria. This is particularly important in sectors like healthcare, where equipment must adhere to strict standards to ensure patient safety and operational efficiency.

The balance sheet (statement of financial position) shows assets, liabilities, and equity at a point in time. The profit and loss account (income statement) shows revenues, expenses, and profit over a period. These are the two core statements used to assess supplier stability and performance. The cash flow statement is useful but supplementary, while chairman’s statements are narrative, not financial records. Responsible sourcing emphasises using balance sheet and P&L analysis to evaluate supplier financial strength, ensuring continuity of supply and risk management.

Adopting ISO environmental standards aligns procurement practices with sustainability goals and helps reduce environmental and social impacts. Although implementing ISO standards may require initial adjustments, they foster long-term benefits by promoting responsible and ethical sourcing practices across the supply chain.

Explanation

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

Unscheduled audits can provide an unbiased view of supplier practices and help identify compliance issues that might be hidden during scheduled audits. This approach supports responsible sourcing by ensuring accurate assessments of ethical and quality standards.

Including ESG criteria in tender analysis helps ensure suppliers align with the buyer’s sustainability initiatives (1) and helps identify risks within the supply chain (4), such as unethical labour practices or environmental harm. Improving workflow (2) and spend monitoring (3) are operational concerns but not ESG drivers. Responsible sourcing requires procurement professionals to integrate ESG into decision-making, ensuring not only cost-efficiency but also ethical compliance, resilience, and long-term value. This reflects the growing importance of corporate social responsibility (CSR) and stakeholder expectations.

Where price leverage is limited, buyers should seek value-adds: extended warranties, service levels, training, spares, delivery schedules, sustainability commitments, or risk-sharing. This aligns with total value and ethical outcomes beyond headline price.

Restricted tendering is a two-stage process: first, a pre-qualification stage to ensure only capable, compliant suppliers are invited; second, the issue of the ITT to that shortlist. This method is appropriate when requirements are complex, high-value, or where assurance of supplier competence is essential. It is not based solely on price and does not rely on limited supplier numbers but on filtering through qualification. This balances transparency and efficiency, avoiding wasteful evaluation of unsuitable suppliers while still maintaining competitive tension. CIPS L4M4 highlights that restricted tendering strengthens governance, improves efficiency, and ensures due diligence in supplier selection.

Single sourcing can be appropriate when set-up costs are high, making it impractical to involve multiple suppliers. This aligns with responsible sourcing principles, particularly for high-value or specialised items, where relationship management and collaboration with one supplier can enhance quality and efficiency.

Explanation

Price and Quality are the two considerations when marking a competitive tender.

Location, distribution and reputation may be considered for SOME tenders, but these would be sub-categories that fall under 'quality questions.

Explanation

The correct answer is 'yes- the public sector should advertise as a call for competition'. They do this in the Official Journal of the European Union (OJEU). Public Sector has to be transparent abouteverything and treat all suppliers equally. So they can't just approach the ones they like.

In the study guide it says OIEU and this is a typo. It's OJEU.

What is The OJEU in 2 minutes or less (trackerintelligence.com)

Phishing is categorized as fraud because it involves deceptive practices to gain sensitive information or financial benefits. Responsible sourcing includes ensuring that cybersecurity measures are in place to prevent fraud and protect sensitive information within supply chains.

Explanation

96 is the correct answer- weighted point systems should add up to 100 (as in 100%)

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.

Implementing full anti-bribery training, policies, and procedures demonstrates a proactive stance against bribery and corruption. Ethical sourcing principles encourage organisations to institutionalise comprehensive anti-bribery measures to ensure transparency, fairness, and compliance within the supply chain, reducing the risk of corrupt practices.

Explanation

The correct answer is the CIPS Code of Conduct. This is a voluntary document about doing 'good procurement' i.e. treating suppliers with respect.

EU Procurement Directive is legislation, so isn't voluntary

ISO9001 is about quality management

ILO is an organisation rather than a document

Explanation

you would use a restricted approach when interest is likely to be high. The buyer needs a method of de-selecting unsuitable bidders and creating a shortlist of acceptable organisations.

For complex requirements you could use both an open or restrictive tender- the difference between the approaches is about how many bids you're likely to get rather than the complexity of it.

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."

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.

Explanation

The correct answer is financial stability (this is done by using all of those lovely ratios in chapter 1.3) and capacity and capability (which are part of Carter's 10 Cs).

At PQQ stage you're looking purely at whether the supplier is good or bad (to put it simply). You don't give them details of your requirement yet, so they're not providing a quote / pricing structure / price schedule at this point in time. That would be at the next stage, IF they pass PQQ, when you issue the tender competition.

Assessing the ethical reputation of suppliers is crucial to mitigate risks associated with unethical practices. Negative media coverage regarding the fair treatment of subcontracted staff is a significant indicator of potential ethical issues within a supplier's operations. Such information can highlight concerns related to labor rights violations, discrimination, or unsafe working conditions, which can adversely affect the buying organization's reputation if not addressed.

Demand and currency fluctuations affect commodity pricing. November shows lowest demand, which usually reduces price pressure. Conversely, May (high demand) and months with strong supplier currencies (January, April) would increase costs. By ordering in November, the buyer leverages demand cycles to obtain lower prices. Responsible sourcing requires buyers to monitor market intelligence and seasonal trends to time purchases effectively, mitigating risks of price volatility while ensuring supply continuity. This reflects CIPS’s emphasis on category management and proactive procurement planning.

Explanation

GDP = gross domestic product = "the monetary value of goods and services manufactured or sup-plied in a financial period". People use it to say whether a country's economy is strong or weak.

Stock markets look at the value of public limited companies within a country.

Commodity indices look at the value of commodities such as steel, oil and wheat at a point in time

Average changes in price over a year can be measured by CPI or PPI

Restricted tendering involves filtering suppliers through a prequalification stage and then evaluating proposals. The selection focuses on ensuring suppliers have adequate production capacity and financial stability to deliver on requirements. These are critical to continuity, quality, and risk management. Decommissioning costs are not typically part of supplier selection, and total life cost is an award criterion considered later in evaluation. By checking production capacity and financial stability, buyers mitigate risks of underperformance or financial collapse. This approach aligns with responsible sourcing, where due diligence ensures suppliers can sustainably meet obligations.

Explanation

ILO = the International Labour Organisation.

ISO is the International Standardisation Organisation- they also come up in this exam.

Fair Trade is about paying suppliers properly.

WWF is the World Wildlife Foundation, or if you watched wrestling in the 90s, the original WWE. You do not need to know about wildlife or wrestling for this exam.

Under theFOB (Free on Board)Incoterm, the seller is responsible for delivering the goods onto the vessel at the named port of shipment. Once the goods are on board, the risk and responsibility transfer to the buyer. From that point onward, the buyer assumes all costs and risks associated with the transportation of the goods, including freight charges, insurance, unloading, and delivery to the final destination.

This interpretation aligns with the Incoterms® 2020 rules set by the International Chamber of Commerce (ICC). It's crucial to note that FOB is applicable only for sea or inland waterway transport and is not suitable for containerized cargo, where theFCA (Free Carrier)term is more appropriate.

The balance sheet and profit and loss account provide a comprehensive view of an organisation’s financial health, showing assets, liabilities, and profits. These statements are essential in evaluating a supplier’s financial capacity, aligning with responsible sourcing practices for financial stability.

Explanation

Items of 'Non-Preferential Origin' are subject to tariff quotas and other customs commercial regulations. 'Preferential Origin' goods have no duties or tariffs.

The good news is CIPS have significantly simplified section 3.2 of the syllabus. The new study-guide is much lighter on names of documents and protocols for importing and quotas etc. The focus of this Learning Outcome has shifted more to Inco Terms so I would focus on that for revision, but do make sure you have a basic understanding of documents, law and jurisdiction.

Sourcing relates to identifying suppliers (E) and requesting quotations (D) as part of the market engagement stage of the procurement cycle. By contrast, creating call-off orders, raising requisitions, and goods receipting are post-contract operational activities. Responsible sourcing highlights that supplier identification and quotations are key to ensuring ethical, competitive, and compliant supply chains. These activities help ensure alignment with organisational goals, supplier diversity, and sustainability objectives.

Incoterms clarify responsibilities between buyers and sellers, reducing certain risks but not eliminating them entirely. Responsible sourcing requires recognising that Incoterms are only part of risk management in international trade, and other factors, such as supplier reliability and quality, must be considered.

During tender evaluation, buyers must ensure that each submission is analysed thoroughly and consistently. Producing a report on each submission (1) supports transparency, auditability, and fairness. Checking arithmetical accuracy (3) ensures that pricing data is correct and prevents calculation errors from misleading the evaluation. Reviewing pre-qualification questionnaires is part of the earlier stage, not tender analysis, while market dynamics are external context, not part of evaluating responses. Responsible sourcing highlights the importance of structured and auditable evaluation processes to protect against bias, ensure compliance, and provide stakeholders with a defendable record of decisions.

Public sector procurement is bound by transparency, fairness, and value-for-money principles. Once minimum thresholds are met, evaluation must be based on pre-published weighted criteria (often combining price, quality, sustainability, and social value). Sole reliance on price or location would breach fairness and equal treatment obligations. Weighted scoring ensures that decisions are objective, defendable, and aligned with responsible sourcing principles. This also allows ethical and sustainability considerations to be formally scored alongside commercial ones, reinforcing good governance.

A bill of lading serves as:

Evidence of the contract of carriage between shipper and carrier.

Explanation

the correct answer is 'marketplace competition'.

Ethical practice is about prohibiting corrupt and unfair practice, rather than issues of supply and demand. Although being in a cartel is 'unethical behavior' this option doesn't fully answer the question which talks about limiting supply- this is related to marketplace competition.

Explanation

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.

A carnet (ATA Carnet) is an international customs document that allows for the temporary, duty-free and tax-free movement of goods across borders, usually for exhibitions, trade fairs, or professional equipment. It is not proof of origin (which is confirmed by a certificate of origin), nor is it an insurance document. It is also not restricted to European exports. By reducing customs paperwork and costs for temporary movements, carnets support trade efficiency but do not replace origin or insurance documents. Responsible sourcing requires procurement professionals to know which trade documents are appropriate for compliance and risk management.

The 'people' element of the triple bottom line focuses on social responsibility, including fair labor practices and community engagement. A supplier's demonstrated commitment to a labor industry code of conduct indicates adherence to ethical labor standards, such as fair wages, safe working conditions, and respect for workers' rights, aligning with the social sustainability goals of the project.

Exact Extract from Study Guide:

"The triple bottom line – profit, people and planet

• Adopt sustainable practices, standards and specifications in the supply chain

• Consider the social impact of the organisation’s behaviours

• Design procurement processes to deliver social outcomes as well as, or as an alternative to, normal economic measures of value"

In an open tender process, any supplier can submit a bid, and there is no pre-qualification stage. This approach is suitable when the requirements are well-defined, and there is a sufficient number of suppliers in the market to ensure competition. However, if too many suppliers respond, it can lead to an overwhelming number of bids to evaluate. Therefore, it's essential to consider the number of potential suppliers in the market before opting for an open tender.

Exact Extract from Study Guide:

"Open procedure – used for well-specified requirements and there is no pre-qualification of bidders. Many suppliers could submit a bid, which could result in lots of bids to assess, so the open procedure is normally only used where the number of potential bidders is expected to be relatively low."

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.

Transparency International provides the Corruption Perceptions Index, which ranks countries based on perceived levels of public sector corruption, offering valuable insights into the anti-bribery risks of a specific country. Additionally, understanding the local anti-corruption legislation helps the buyer assess the legal framework and enforcement mechanisms in place, which is crucial when entering into contracts with suppliers in new jurisdictions.

Exact Extract from Study Guide:

"Transparency International’s Corruption Perceptions Index is a key resource for assessing the risk of corruption in different countries. Local anti-corruption legislation provides the legal context within which suppliers operate, and understanding these laws is essential for ensuring compliance and ethical sourcing."

Explanation

Most Economically Advantageous Tender (MEAT) is the Public Sector's go to evaluation criteria.

NOTE that this is changing from October 2023. Public Sector Procurement is currently based on legislation called PCR 2015 which itself is based on EU Procurement Directives. Now the UK has officially Brexited, we're making our own laws and the new Procurement Bill will be coming into effect in November 2024. One of the major changes is that MEAT is changing to MAT (most ad-vantageous tender - without the economical bit).

If you're sitting this exam until July 2024- you're fine- learn what the study guide says. If you're taking the exam from November 2024 I'm not sure what students are expected to do. The entire section on public sector procurement is incorrect for you. My best guess is CIPS may removequestions this section as the study guide will be wrong, but I really don't know how they plan to handle this.

The new Procurement Bill - MEAT to MAT - Hempsons - Hempsons

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.

International trade relies on proper documentation. A certificate of origin (2) confirms where goods are produced, often required for customs clearance and to determine tariffs. A purchase order (3) provides formal buyer intent and agreement of terms, forming the basis for customs and logistics processes. Product quality statistics (1) and supplier financial position (4) are relevant for supplier selection and monitoring but not directly for import/export processes. Responsible sourcing requires procurement professionals to ensure correct documentation is used to avoid delays, penalties, or breaches of trade regulations.

Credit rating agencies assess an organisation’s financial stability and risk of default. Key data includes financial obligations (such as outstanding loans, debt levels, repayment schedules) and payment history (how reliably the firm pays creditors and suppliers). These indicators show liquidity, cash flow reliability, and debt servicing ability. Factors such as “value for money” or “ecosystems” are irrelevant in a financial risk context. Responsible sourcing requires buyers to consider supplier financial resilience, as instability could disrupt supply chains, increase risk exposure, and lead to reputational damage. Agencies like Moody’s, S&P, and Fitch provide independent assessments that complement in-house financial analysis.

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.

Under FOB (Free on Board), the buyer assumes responsibility once the goods are loaded onto the ship, including costs and risks beyond this point. This Incoterm is commonly used in international trade, helping both parties clarify responsibilities and promote fair risk distribution.

When supplier audits reveal issues, buyers should implement constructive measures. Supplier development programmes (A) help improve performance through training, mentoring, and joint improvement initiatives. Corrective action plans (E) outline specific steps and timelines to address identified gaps. Options like hiring supplier staff or informal brainstorming do not provide structured improvements, while violating contracts would undermine governance. Responsible sourcing emphasises supplier engagement and continuous improvement, ensuring suppliers meet ethical, quality, and sustainability expectations rather than simply penalising them.

Reviewing historical supplier spend data enables procurement professionals to identify areas wherecost savings can be achieved by analyzing past expenditures and supplier performance. This analysis also aids in making informed decisions about future supplier engagements by understanding previous spending patterns and supplier reliability.

Exact Extract from Study Guide:

"Spend analysis is a process that analyses the historical spend data of your organisation to provide answers to questions concerning spend visibility, compliance, and cost-saving opportunities."

The Universal Declaration of Human Rights (UDHR) Article 23(2) states that "Everyone, without any discrimination, has the right to equal pay for equal work." This underscores the principle of equality in the workplace, ensuring that employees are treated equally regarding pay and conditions. Therefore, employees raising concerns about unfair pay compared to their colleagues are exercising their right to be treated equally.

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.

Explanation

So you can immediately discount the options starting with yes.

Quoting in GBP / £ rather than the supplier's currency reduces the risk to the buyer. It will not re-duce the cost of the import, and will probably increase it as the supplier is then taking on the risk of currency fluctuations.

Explanation

they are stock markets.

What is the FTSE 100 Index? Complete Beginner's Guide (moneycheck.com)

BSE SENSEX – Wikipedia

Explanation

ISO9001 is Quality Management so is therefore the correct answer. The other options can be used to appraise suppliers but do not link directly or fully to Quality Management.

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.

Responsible procurement and supply are governed by several key regulatory areas to ensure ethical and fair practices. These include:

Ethical Practice:Ensures that organisations conduct business in a manner that is ethical and free from corruption.

Data Protection:Involves safeguarding personal and sensitive information, ensuring compliance with laws such as the General Data Protection Regulation (GDPR).

Marketplace Competition:Ensures fair competition among businesses, preventing monopolies and promoting consumer choice.

These areas are critical in maintaining integrity, trust, and compliance within procurement activities.

Exact Extract from Study Guide:

"Key areas of regulation that organisations must follow include data protection, ethical practice, health, safety and environment, worker rights, marketplace competition, and product safety standards."

Explanation

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.

Explanation

total life-cycle costs include; acquisition costs, maintenance and training.

Added value and functional fit are quality criteria that should also be evaluated when selecting a supplier, but do not fall under total life-cycle costs.

Note: total life cycle costs and whole life asset management are the same thing. You may see both terms used in the exam. I think CIPS is moving more towards Whole Life Asset Management now as the preferred vocabulary but they're the same thing.

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.

Under EU Public Procurement rules, the permissible procurement procedures include the Open Procedure and the Restricted Procedure. The Open Procedure allows any interested party to submit a tender, while the Restricted Procedure involves a two-stage process where only selected candidates are invited to submit tenders. These procedures are designed to ensure transparency, competition, and equal treatment in public procurement.

Exact Extract from Study Guide:

"The EU Public Procurement Directive outlines several procedures including Open Procedure and Restricted Procedure, which are designed to facilitate fair and transparent procurement processes."

Weighted points systems are appropriate for complex or high-value purchases where multiple factors (e.g., quality, sustainability, delivery) must be balanced. For simple, low-value purchases like pens, price is typically the only differentiating factor. Using a weighted points system would overcomplicate the process, wasting resources. Responsible sourcing requires proportionality — applying robust evaluation methods where justified, while keeping processes simple and efficient for routine purchases. This ensures efficiency without compromising governance, freeing procurement resources for strategic projects.

The decision to make a product internally rather than sourcing it externally is influenced by several factors. One of the primary considerations is the availability of in-house competencies and capacity. If an organisation possesses the necessary skills, technology, and resources to produce the required goods or services efficiently, it may opt for internal production to maintain control over quality, reduce costs, and protect proprietary information.

Exact Extract from Study Guide:

"Make or buy decisions take into account: product/service is core, the organisation's capacity to make, current market (cost saving with economy of scales and/or logistics), amount of competition."

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.

When evaluating quotations, responsible buyers must look beyond headline price. Lead times (1) affect operational continuity. Add-on costs (2) (e.g., packaging, delivery, handling) can significantly change total cost. Past performance (4) demonstrates reliability and quality, crucial for ethical and sustainable sourcing. Wastage rates (3) may be relevant but are typically assessed in performance monitoring, not initial quotation evaluation. This holistic view aligns with the total cost of ownership (TCO) approach promoted by CIPS, ensuring procurement decisions account for both direct and indirect impacts.

Explanation

The correct answer is Invitation to Tender. This is sent out to suitable suppliers inviting them to bid for the opportunity.

A PQQ - pre-qualification questions naire- is sent to suppliers to see if they are suitable. The QUESTION NO: 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.

Explanation

Incoterms describe who out of the buer and seller; organises transport and what type of transport this is, who pays for insurance, and who organises duty / tariff arrangements when the goods go through customs. See p.131. Note- some students report a lot of questions on Incoterms in the exam, some say they only had 1. If you can, I'd learn them just to be safe.

Explanation

energy, agriculture, metals, livestock are the four trading categories on the stock exchange. Some-times there's a 5th category added which is 'environmental credits'. This is a fairly new thing and you don't need to know anything about this for this exam.

Question no commodities will mainly centre around characteristics of commodities and factors that affect pricing.

Commodities are discussed much more in detail in L5M4. At level 4 you just need a basic overview.