[May 31, 2026] Pass CIPS Level 4 Diploma in Procurement and Supply L4M4 Exam With 293 Questions
Ultimate Guide to Prepare Free CIPS L4M4 Exam Questions and Answer
NEW QUESTION # 119
Which of the following should be assessed in supplier proposals to check compliance with environmental, social, and governance (ESG) standards? Select THREE that apply.
- A. The company's code of ethics
- B. Procedures on intra-company trading
- C. The company's criteria for make or buy decisions
- D. The company's employee working conditions
- E. The company's policy on carbon emissions
- F. The financial stability of the company
Answer: A,D,E
Explanation:
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.
NEW QUESTION # 120
Which of the following are reasons to outsource part of a business to an external supplier? Select TWO.
- A. the reduction in the need to continually invest in new machinery
- B. overheads can be kept as effective as possible
- C. there are more resources in-house
- D. the product or service is core to the organisation
Answer: A,B
Explanation:
Reasons to outsource include; 'overheads can be kept as effective as possible' and 'the reduction in the need to continually invest in new machinery'.
When you outsource, you transfer the costs of overheads to the supplier and it is their responsibility to buy new machinery as and when is required. For example if you outsource cleaning, the cleaning company is responsible for replacing the hoovers and floor cleaner The other two options would be reasons to keep something 'in-house'.
NEW QUESTION # 121
Incoterms are divided into four main groups to follow movement of goods covering exporter's premises, export/import points, and cost/risk. Which letters represent the groups?
- A. E, F, C, D
- B. A, B, C, D
- C. E, F, B, C
- D. B, C, F, C
Answer: A
Explanation:
Incoterms are grouped into four categories:
* E: Departure (EXW)
* F: Main carriage unpaid (FCA, FAS, FOB)
* C: Main carriage paid (CFR, CIF, CPT, CIP)
Reference: CIPS L4M4 Study Guide (v2), LO: "Application" - Incoterms groupings and risk allocation.
NEW QUESTION # 122
The procurement manager has supplier data: Current Assets = $300 (Stock $200, Debtors $60, Cash $40).
Short-Term Liabilities = $150 (Bank overdraft). Which calculation gives the current ratio?
- A. 300 - 150 × 100
- B. 300 - 200 ÷ 150 × 100
- C. 300 ÷ 150
- D. 300 - 200 ÷ 150
Answer: C
Explanation:
The current ratio = Current Assets ÷ Current Liabilities. Here, Current Assets = 300; Current Liabilities =
150. Therefore, Current Ratio = 300 ÷ 150 = 2.0. This means the supplier has twice the assets available to cover short-term debts, indicating strong liquidity. The other options incorrectly subtract assets or liabilities, which is not the formula. Responsible sourcing emphasises interpreting ratios accurately: a ratio below 1 signals liquidity risks, while excessively high ratios may indicate inefficient asset utilisation.
Reference: CIPS L4M4 Study Guide (v2), LO: "Application" - current ratio calculation and interpretation.
NEW QUESTION # 123
The bill of lading is one of the main documents associated with sea freight within international sourcing.
Which of the following statements represent some of the uses of the bill of lading? Select TWO that apply.
- A. It provides evidence of the country of origin of the goods
- B. It provides evidence of the contract of carriage for the goods
- C. It provides evidence of the title of ownership of the goods
- D. It provides evidence guaranteeing the use of Incoterms on the goods
- E. It provides evidence that the goods are fully insured in transit
Answer: B,C
Explanation:
The bill of lading serves as both a receipt of goods and a document of title, which means it confirms the contract of carriage and can transfer ownership. Responsible sourcing in international trade requires precise documentation, which is why the bill of lading is critical in verifying both carriage and title.
NEW QUESTION # 124
Daniel is evaluating bids from new suppliers who are looking to supply his company XYZ Indus-tries with components for manufacturing. Although price is important, Daniel wishes to consider 'added value'. Which of the following is considered an 'added-value solution'? Select THREE
- A. bulk discount
- B. on time in full deliveries
- C. sustainability
- D. cost plus pricing
- E. innovation
Answer: B,C,E
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.
NEW QUESTION # 125
The Freedom of Information Act is a piece of UK legislation which allows members of the public to request information on issues such as public sector sourcing. When a request is made, it is compulsory for the public sector to provide this information to the public. Is this statement true?
- A. yes- the information must be provided within 28 days
- B. no- the public sector can choose not to publish information if it is not deamed to be in the public interest
- C. no- the public sector does not need to provide information on sourcing activities
- D. yes- the information must be posted publically online
Answer: B
Explanation:
the correct answer is 'no- the public sector can choose not to publish information if it is not deemed to be in the public interest'.
They use something called the 'public interest test' to determine if the information should be re-leased or not.
For example they may not respond to a request asking how many bullets the UK Army has in storage, as that would be detrimental to national security interests.
Responses to requests are made within 21 days, not 28.
NEW QUESTION # 126
Tracey Collum is a procurement professional and married to Nick Collum.
Tracey has been leading a tender for a new radar system, where four suppliers have submitted their bids.
After the bids were received, Nick joined one of the suppliers (Supplier X) as the project director for radar systems.
Nick has asked Tracey to award the contract to Supplier X.
What should Tracey do?
- A. Ask to be removed from the tender due to a conflict of interest and complete a conflict of interest form
- B. Remove Supplier X from the tender due to a conflict of interest and continue with the tender
- C. Award the contract to Supplier X because Nick will be promoted if Supplier X wins the contract
- D. Award the contract to Supplier X because Tracey can ask for a better price because they are married
Answer: A
Explanation:
To maintain integrity and avoid conflicts of interest, Tracey should declare the conflict and remove herself from the tender process. Ethical sourcing practices emphasize transparency and fairness, which prevent potential biases and maintain trust within procurement processes.
NEW QUESTION # 127
Which of the following is an advantage to the TUPE regulations?
- A. Increase in buyer power
- B. Value for money for the buying organisation
- C. Continuity of supply for the buying organisation
- D. Reduced overheads for the buying organisation
Answer: C
Explanation:
Continuity of supply for the buying organisation is an advantage of TUPE regulations.
TUPE is the Transfer of Undertakings (Protection of Employment). It's when the workforce / em-ployees of one company go to work for another one, usually after their company is bought out. They're transferred to the new company along with the furniture and buildings.
TUPE is UK specific. You don't need to know too much details about it for this exam - just what it is and the benefits. The main benefit is people don't lose their jobs when their company gets bought out. Basic guide to TUPE (pinsentmasons.com)
NEW QUESTION # 128
What information would you expect to find on a supplier's response to a 'Request for Information'? Select TWO
- A. their capability and capacity to fulfil a contract
- B. their ethical and sustainability policies
- C. their marketing strategy
- D. detailed information regarding their costing structure
Answer: A,D
Explanation:
A RFI typically finds the following information from potential suppliers; ethical and sustainability policies and their capacity / capability to fulfil a contract. It could also include financial position, mission and vision.
NEW QUESTION # 129
Zeb is a Procurement Manager at Zig Zag Zips manufacturing. The organisation has a complex supply chain and works with 46 different suppliers, many of these international. Which of the follow-ing would be the most useful for Zeb to address issues of Modern Slavery?
- A. work with less suppliers to reduce the risk of slavery entering the supply chain
- B. ensure all 46 suppliers publish an Anti Slavery Statement in line with the Modern Slavery Act
- C. carry out regular due diligence checks on the supply base
- D. ask all suppliers to get Fair Trade accredited
Answer: C
Explanation:
Carry out due diligence is the correct answer. The other answers are incorrect:
- ensure all 46 suppliers publish an Anti Slavery Statement in line with the Modern Slavery Act is wrong because thequestionstates that some suppliers are international. The legislation is UK, meaning international suppliers don't have to do the statement. It also only applies to companies with a turnover of £36m, and some of Zeb's suppliers may be smaller than this.
- work with less suppliers to reduce the risk of slavery entering the supply chain is a silly answer be-cause Zeb probably needs all of his suppliers. There's probably a reason he uses that many.
- ask all suppliers to get Fair Trade accredited is also a silly answer. Fair Trade only exists in some industries such as cocoa and bananas. Zig Zag Zips is in manufacturing so it's probably not going to be able to fairtrade accredit some of the stuff it buys.
NEW QUESTION # 130
A "carnet" provides evidence of the origin of goods shipped in international trade. Is this correct?
- A. Yes, only used when exporting goods from Europe
- B. Yes, a widely used import document confirming origin
- C. No, it allows temporary free movement of goods
- D. No, it is a type of insurance cover
Answer: C
Explanation:
An ATA Carnet is an international customs document that allows temporary duty-free movement of goods for exhibitions, trade fairs, or professional use. It is not a certificate of origin, which proves where goods are manufactured, nor is it insurance. Carnets reduce administrative barriers and duties for temporary imports
/exports. Responsible sourcing requires buyers to understand the correct use of trade documents to ensure compliance and avoid penalties, while distinguishing between documents that confirm origin, provide insurance, or facilitate temporary movement.
Reference: CIPS L4M4 Study Guide (v2), LO: "Application" - international trade documentation.
NEW QUESTION # 131
Which of the following is not a Human Rights as protected by the UN Declaration on Human Rights?
- A. the right to free speech
- B. the right to change nationality
- C. the right to be treated equally
- D. freedom of Belief and to change beliefs
Answer: B
Explanation:
the right to change nationality is not included in the UN Declaration of Human Rights. There are 30 in total but you're not expected to know them all. You should know the big ones though which are; life, security, belief, equal treatment, free speech and expression. A summary can be found here: Universal Declaration of Human Rights | United Nations
NEW QUESTION # 132
Why is it specifically important for public sector organisations to use a competitive tendering process?
- A. To drive down costs of production
- B. To allow all organisations to tender
- C. Value for money and transparency
- D. Increase competition in markets
Answer: C
Explanation:
Public sector organisations are required to demonstratevalue for money, transparency, and fairnessin the use of public funds. Competitive tendering ensures procurement decisions are objective, auditable, and based on pre-defined criteria. While competition and market access are benefits, the primary obligation is to ensure taxpayer money is spent responsibly and ethically. Competitive tendering reduces the risk of corruption, bias, and inefficiency, supporting accountability to stakeholders and the public. Ethical and responsible sourcing in the public sector is therefore closely linked to transparent procurement processes and regulatory compliance.
Reference:CIPS L4M4 Ethical & Responsible Sourcing Study Guide (v2) - public sector procurement principles, transparency and value for money.
NEW QUESTION # 133
What mechanism helps buying organisations achieve a best value outcome in a tender exercise?
- A. Advertising requirements
- B. Providing a debrief
- C. Timetabling the process
- D. Restricting the number of bidders
Answer: B
Explanation:
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.
NEW QUESTION # 134
According to the CIPS code of conduct, which laws should a procurement professional adhere to?
- A. all international procurement legislation
- B. all laws within countries they have business and contracts in
- C. all laws within the country they work in
- D. all laws published by international organisations such as ILO
Answer: B
Explanation:
The CIPS Code of Conduct says to adhere to all laws of countries in which I practice. So if you're in the UK and procure stuff from China, you need to abide by both UK and Chinese laws, not just UK laws.
There's no international procurement laws- these are all different for different countries.
ILO doesn't publish laws.
NEW QUESTION # 135
Mark is an audio visual category buyer in the public sector and is looking to purchase a large quantity of interactive screens for medical lecture rooms across a university campus. Mark expects this to cost in excess of £950,000 and suggests to his user group that a competitive tendering process should take place. Was this the right approach?
- A. Yes, because the anticipated value requires a competitive tendering process to take place
- B. No, competitive tendering should only be used when the value justifies the resources required
- C. No, because the competitive tendering process will be time-consuming for the university
- D. Yes, as all public sector procurement should go through a competitive tendering process
Answer: A
Explanation:
In the public sector, procurement activities exceeding certain financial thresholds are required to undergo competitive tendering processes. The anticipated expenditure of £950,000 surpasses the threshold that mandates a formal tendering procedure to ensure compliance with public procurement regulations, promote competition, and achieve value for money.
Exact Extract from Study Guide:
"Public sector procurement activities that exceed specified financial thresholds must follow formal competitive tendering procedures to ensure transparency and compliance with regulations."
NEW QUESTION # 136
Which of the following characteristics are likely to be required within sourcing processes undertaken in the public sector?
* An emphasis on long-term supplier relationships where possible
* Maintaining service levels within value and cost parameters
* All dealings between buyers and suppliers are kept confidential
* A competitive tendering process is usually encouraged
- A. 1 and 2 only
- B. 2 and 4 only
- C. 1 and 3 only
- D. 2 and 3 only
Answer: B
Explanation:
Public sector sourcing prioritises maintaining service levels within budget constraints and often mandates competitive tendering to promote transparency and fairness. These principles align with ethical sourcing practices, ensuring responsible expenditure and fair competition among suppliers.
NEW QUESTION # 137
Avram is a buyer for a private sector electrical components company and is promoting the advantages of competitive bidding.
When is competitive bidding appropriate?
Select TWO that apply.
- A. When price is not the most important award criterion
- B. When there is sufficient time to conduct the procedure
- C. When it is impossible to estimate production costs accurately
- D. When there are adequate numbers of potential suppliers in the market
- E. When changes to the specification are likely as the contract progresses
Answer: B,D
Explanation:
Competitive bidding is most appropriate when there is asufficient number of capable suppliersto create genuine competition and whenadequate timeis available to conduct the process fairly and transparently.
These conditions allow suppliers to prepare robust bids and enable buyers to evaluate proposals properly.
Competitive bidding is less suitable where specifications are unstable or urgent decisions are required. Ethical and responsible sourcing emphasises proportionality and fairness, ensuring competition is used where it adds value and does not compromise delivery, governance, or stakeholder needs.
Reference:CIPS L4M4 Ethical & Responsible Sourcing Study Guide (v2) - competitive tendering; appropriateness of sourcing routes.
NEW QUESTION # 138
In which type of market would you be most likely to find a 'perfect competition'?
- A. monopolistic competition
- B. oligopoly
- C. monopoly
- D. commodity
Answer: 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'
NEW QUESTION # 139
Sourcing is part of the procurement cycle and is likely to be used in conjunction with which activities? (Select TWO)
- A. Identifying potential suppliers
- B. Raising purchase requisitions
- C. Creating call-off orders
- D. Uploading goods received notes
- E. Requesting quotations
Answer: A,E
Explanation:
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.
Reference: CIPS L4M4 Study Guide (v2), LO: "Application" - sourcing activities within the procurement cycle.
NEW QUESTION # 140
Kiran is appraising some potential suppliers and has noticed that one of these suppliers has an extremely high gearing ratio. What would this suggest?
- A. the supplier has a lot of long-term debt
- B. the supplier is extremely profitable
- C. the supplier has a high cost of sales
- D. the supplier has a strong return on investment
Answer: A
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.
NEW QUESTION # 141
A buyer has been tasked with placing an order for steel from another country and using Incoterms for delivery. The buyer's organisation has an in-house transportation and export clearance department. During negotiations, the buyer achieved a 25% cost reduction by accepting responsibility for loading, transportation, and export clearance. Which Incoterm has been agreed?
- A. CIP - Carriage and Insurance Paid
- B. FOB - Free on Board
- C. EXW - Ex Works
- D. FCA - Free Carrier
Answer: C
Explanation:
The EXW (Ex Works) term means the seller's responsibility ends once goods are made available at their premises. The buyer must take on costs and risks from that point, including loading, transport, and export clearance. Because the seller is not responsible for logistics, the quoted price is lower. In contrast, FCA includes delivery to a carrier, FOB covers loading onto a vessel, and CIP includes carriage and insurance arranged by the seller. By accepting these responsibilities, the buyer leveraged cost savings, demonstrating knowledge of Incoterms and alignment with efficient sourcing practices.
Reference: CIPS L4M4 Study Guide (v2), LO: "Application" - Incoterms responsibilities and cost-sharing.
NEW QUESTION # 142
Greg is doing some research on a potential supplier and is concerned that the supplier's funding is based on long-term debts and loans. Working with this supplier therefore might bring additional risks to Greg's business. What should Greg do about his concerns?
- A. work out the supplier's EBITDA
- B. work out the supplier's gearing ratio
- C. use the Return on Investment Ratio
- D. do an Acid Test
Answer: B
Explanation:
Greg needs to use a gearing ratio. Gearing is a measure of how the business is being funded and is based on the ratio of debt to equity Gearing comes up a lot in the exam. Also make sure you know what Return on Investment, Acid Test and EBITDA are.
Return on Investment (ROI): How to Calculate It and What It Means (investopedia.com) EBITDA: Definition, Calculation Formulas, History, and Criticisms (investopedia.com) Acid-Test Ratio: Definition, Formula, and Example (investopedia.com)
NEW QUESTION # 143
The procurement manager has received the following data from the supplier's accounts to facilitate the calculation of the supplier's current ratio:
Current Assets: Stock $200; Debtors $60; Cash $40; Total $300
Short Term Liabilities: Bank overdraft $150
Which calculation will the procurement manager use to find out the current ratio?
- A. (300 ÷ 150) × 100
- B. (300 - 200) ÷ 150
- C. (300 - 200 - 150) × 100
- D. 300 ÷ 150
Answer: D
Explanation:
The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. It is calculated by dividing current assets by current liabilities. In this case:
Current Assets = $300
Current Liabilities = $150
Current Ratio = 300 ÷ 150 = 2.0
This indicates that the supplier has twice as many current assets as current liabilities, suggesting good short- term financial health.
Reference:
CIPS Level 4 Diploma in Procurement and Supply, L4M4 Study Guide, Section 2.3: Financial Appraisal of Suppliers
NEW QUESTION # 144
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