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CIPS L4M4 Exam
Ethical and Responsible Sourcing (Page 2 )

Updated On: 1-Feb-2026
Page 2 of 25
PDF with 180 Questions

Which of the following should be considered when calculating ratios relating to a supplier's liquidity?

  1. inventory
  2. reserves
  3. receivables
  4. profit

Answer(s): A



For what type of purchase would you use a Futures Exchange?

  1. Tail Spend
  2. Capital Expenditure
  3. Commodity
  4. High value, high risk

Answer(s): C

Explanation:

Futures exchanges are used to trade commodities. It's when a buyer and supplier agree a price and deal for something in the future. For example a carrot farmer may agree to sell his carrots to Gary in 3 months time when they're finished growing. It's used when the product / commodity isn't ready yet.
It's also used for hedging and other complex financial stuff- but you don't need to know that yet. Commodities and Future contracts are a big part of L5M4 to warn you though. Futures Contract Definition: Types, Mechanics, and Uses in Trading (investopedia.com)



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

  1. to understand the level of risk the supplier poses to your organisation
  2. to understand if their prices reflect market value
  3. to find out how much money the supplier has in the bank
  4. to find out if the supplier has any unethical business practices

Answer(s): A

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.



In which type of market would you be most likely to find a 'perfect competition'?

  1. monopoly
  2. oligopoly
  3. commodity
  4. monopolistic competition

Answer(s): B

Explanation:

An oligopoly. Perfect competition is a situation in a marketplace where there is plenty of competition. A monopoly or monopolistic competition would have 'imperfect competition'



Commodities can be traded on a stock exchange and are generally divided into one of four categories.
Which of the following is not one of these four categories?

  1. energy
  2. livestock
  3. metals
  4. plastics

Answer(s): D

Explanation:

Plastic is not a commodity. A commodity is something that is naturally occurring and plastic is manufactured. The other category of commodity is agriculture.



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