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CIPS L4M4 Exam
Ethical and Responsible Sourcing (Page 4 )

Updated On: 9-Feb-2026
Page 4 of 25
PDF with 180 Questions

A balance sheet will show a company's assets, liabilities and shareholder equity.
What is share- holder equity?

  1. the profit from sales once tax has been deducted
  2. the amount of money held in the company's bank account
  3. the owners' residual claim once all debt has been paid
  4. the amount of money from retained earnings

Answer(s): C

Explanation:

shareholder equity = the owner/s of the organisation's residual claim once all debts have been paid.
What Is Shareholder Equity (SE) and How Is It Calculated? (investopedia.com)



If a company is described as 'liquid' what does this mean?

  1. the company is funded on equity rather than debt
  2. the company spends a lot of money
  3. the company is highly profitable
  4. the company has enough money to pay short-term liabilities

Answer(s): 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.



Which of the following would be considered a strategic sourcing activity?

  1. an office ordering copier paper
  2. a bakery ordering eggs
  3. a factory ordering a new machine
  4. a restaurant ordering plastic cups

Answer(s): C

Explanation:

a factory ordering a new machine is the correct answer. Strategic sourcing is for high value, high risk items. The other options given are tactical sourcing as they are low value (eggs, paper and plastic cups).

See p.3 for the differences between tactical and strategic sourcing



What type of relationship should a buyer seek when making strategic sourcing for their business?

  1. transactional
  2. collaborative
  3. arms-length
  4. partnership

Answer(s): B

Explanation:

The buyer should seek a 'collaborative' relationship. Transactional and arms-length relationships are more suited to tactical sourcing. Partnerships are reserved for joint-ventures.



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

  1. cakes
  2. cereal bars and biscuits
  3. cleaning
  4. facilities management

Answer(s): C,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?"






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