ENRICHING PROCUREMENT MINDS

L4M4 – ETHICAL AND RESPONSIBLE SOURCING

REVISION QUESTIONS
Q1. Which of the following represents value for money? Select the TWO that apply.

a. Quantity
b. Price
c. Delivery
d. Relationship
e. Cost

Answer: B and C

Q2. Morgan Fraser is a procurement officer for BNFT Millers, a new maize meal manufacturing
company in South Africa. They have identified 10 potential suppliers for a contract of raw
material (maize) delivery. Fraser is currently assessing the financial status of all the identified
suppliers. Is this necessary?

a. No, assessing supplier’s financial status in unnecessary as it is a cost burden to the

buying organisation
b. Yes, assessing supplier’s financial status is necessary as it indicates the capacity of the
supplier to fulfil the contract consistently
c. Yes, assessing supplier’s financial status is a legal requirement for every buying
organisation
d. No, assessing supplier’s financial status is not necessary as suppliers are reluctant in
disclosing their financial statements

Answer: B

Q3. TRANSFLIT Crafters is a German company prides which itself with producing small and
portable aircrafts which they supply to the rest of the world. They are currently devising a
strategy meant to reduce costs in all areas of their organisation. They have decided to
outsource their cleaning services to Time Cleaners Limited, a highly reputable cleaning
company in German. Is this a justifiable decision?

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 a. Yes, this will enable them to focus their resources on their core competencies and
improve their competitive advantage
b. No, the outsourcing company will charge them higher price which will affect their
profitability
c. Yes, outsourcing will allow the two companies to share the costs hence reducing the
cost to TRANSFLIT Crafters
d. No, outsourcing decision is only justifiable for core competencies which require high and
special competence

Answer: A

Q4. Which of the following are the risks of outsourcing services to a specialist third party
organisation?

1. Negative impact on collaborative relationship between the parties

2. Failure to agree on justifiable and reasonable service cost
3. Risks of intellectual property
4. Loss of key personnel and expertise

a. 1 and 2 only
b. 2 and 3 only
c. 3 and 4 only
d. 2 and 4 only

Answer: C

Q5. Which of the following factors does the buyer need to take into account when undertaking
international sourcing exercise?

1. Quality of materials supplied

2. Exchange rate fluctuations
3. Cultural differences
4. Time differences

a. 1 and 4 only

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 b. 2 and 3 only
c. 1 and 3 only
d. 1 and 2 only

Answer: B

Q6. Which type of sourcing is characterised by a high risk of supply failure and increased risk of
supplier complacency due to lack of competition?

a. Dual sourcing
b. Multiple sourcing
c. International sourcing
d. Single sourcing

Answer: D

Q7. TURNSTA Limited is undertaking a negotiation with one of its critical suppliers to agree on
a contract for the supply of raw materials. They have appointed a negotiation team. The team is
currently determining the negotiation style to use as well the concession they can be able to
make in the negotiation. At what stage of negotiation is the team currently at?

a. Information exchange
b. Preparation
c. Closing
d. Bargaining

Answer: B

Q8. Pre-qualification is used to determine if potential suppliers meet the procurement

organisation’s requirements in respect of which of the following? Select the THREE that apply.

a. In-sourcing
b. Capability
c. Capacity
d. Contract management
e. Pricing schedules
f. Financial stability

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Answer: B, C and F

Q9. A company’s procurement manger wants to assess the financial status of its potential
suppliers for selection. One of the method they intending to use is determining the ability of
the suppliers’ assets to meet their liabilities. Which of the following should the procurement
manager use in undertaking this activity?

1. Return on assets
2. Current ratio
3. Gearing ratio
4. Acid test ratio

a. 1 and 2 only
b. 3 and 4 only
c. 2 and 4 only
d. 1 and 3 only

Answer: C

Q10. Gearing ratio is important to use when assessing a potential supplier’s financial stability. Is
this statement correct?

a. Yes, it is important to know how much of the supplier’s long-term funding is made of
long-term debts
b. No, long term liquidity of the supplier’s company is not a true reflection of stability
c. Yes, gearing creates awareness of how much efficient the supplier’s current are
d. No, profitability is the only factor to consider when assessing a supplier’s financial
stability

Answer: A

Q11. Award criteria to determine the outcome of a competitive tender include which of the
following? Select the TWO which apply.

a. Price

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 b. Brand
c. Distribution
d. Reputation
e. Quality

Answer: A and E

Q12. When awarding a contracting, there is a need for the buyer to balance the commercial
and technical categories. Which of the following must be buyer consider under the technical
criteria? Select the THREE that apply.

a. Specification
b. Cultural fit
c. Delivery
d. Sustainability
e. Ethical standards
f. Quality

Answer: A, C and F

Q13. Which of the following are the risks of using the international sourcing arrangement to
obtain organisational requirements?

1. Extended lead times and risk of potential disruption

2. Currency and exchange rate fluctuations
3. High costs for raw materials due to materials scarcity
4. Low quality products due to incompetent supplier staff

a. 2 and 4 only
b. 1 and 3 only
c. 3 and 4 only
d. 1 and 2 only

Answer: D

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Q14. A supplier’s liquidity can be assessed using ratio analysis, based on the information from
the supplier’s financial statement. You can calculate the current ratio of the supplier, when
comparing which of the following?

1. Long-term debt
2. Current assets
3. Current liabilities
4. Shareholder’s funds

a. 1 and 4 only
b. 2 and 3 only
c. 3 and 4 only
d. 1 and 3 only

Answer: B

Q15. A buyer for a sugar manufacturing company have to undertake two negotiations with two
different suppliers, the other one for the supply of sugar cane to produce sugar, the other for
the supply of packaging material. He has devised two negotiation styles to use with these
suppliers. For the supplier of sugar cane, he is intending to use the negotiation which will be
focused on finding the mutually beneficial outcome for both parties with the aim being to form
a long-term working relationship. For the other supplier, he intends to use the negotiation style
in which he will stand for his own needs and achieving maximum gains at the expense of the
supplier. What are the two negotiation styles the buyer is intending to use?

1. Collaborative style
2. Avoiding style
3. Compromising style
4. Competitive style

a. 1 and 3 only
b. 2 and 3 only
c. 3 and 4 only
d. 1 and 4 only

Answer: D

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Q16. Data on markets and suppliers can be obtained using two sources, primary and secondary
sources. Which of the following are examples of primary sources of data? Select the TWO that
apply.

a. Trade fairs and exhibitions

b. Economic indices
c. Financial journals
d. Direct communication and networking
e. Published surveys

Answer: A and D

Q17. In addition to the primary source of data collected by the buyer, it is also important that
the buyer get access to secondary data about suppliers and markets. Is this statement correct?

a. No, primary sources gives out the most credible and accurate data about suppliers and
markets
b. No, both primary and secondary sources give identical information and so only one
source is necessary
c. Yes, secondary data is require in order to challenge and validate primary data
d. Yes, secondary source gives information direct from the organisation about their
operations

Answer: C

Q18. Which of the following factors affect commodity pricing? Select the TWO that apply.

a. Demand and supply

b. quality
c. Weather condition
d. Local market situation
e. Tariffs

Answer: A and C

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Q19. The role of the credit rating agency is to determine...

1. An organisation’s payment history

2. An organisation’s profitability
3. An organisation’s revenues over a specified period
4. An organisation’s credit limit

a. 1 and 2 only
b. 2 and 3 only
c. 3 and 4 only
d. 1 and 4 only

Answer: D

Q20. In which of the following situations would an invitation to tender be an ideal approach to
use as compared to requesting supplier quotation?

1. Complex and customised organisational requirements

2. High value and high risk contracts
3. Only one suitable potential supplier available
4. Preferred supplier already known and identified

a. 2 and 3 only
b. 1 and 2 only
c. 3 and 4 only
d. 2 and 4 only

Answer: B

Q21. Information gathered from the request for information (RFI) helps the procurement
professional to generate which of the following data? Select the THREE that apply.

a. Quality of the inputs supplied

b. Number of capable suppliers
c. Available market trends

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 d. Acceptable lead times
e. Number of customer complaints
f. Negotiation approach to use

Answer: A, B and C

Q22. 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. Customer questionnaires
c. Focus groups
d. Online surveys
e. Supplier websites

Answer: A and E

Q23. Using secondary data is most likely to meet the specific requirements of the procurement
organisation. Is this a TRUE statement?

a. No, it is generated by other organisations for their internal use

b. Yes, it is available to meet all kinds of requirements
c. No, it has already been generated for other purpose
d. Yes, it is highly confidential and bespoke data

Answer: C

Q24. What are the advantages of using a ‘weighted point system’ when assessing tender bids
from potential suppliers

1. allows transparency
2. highly reliant on numbers
3. high stakeholder engagement
4. requires training to create awareness

a. 1 and 3 only

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 b. 2 and 4 only
c. 2 and 3 only
d. 1 and 2 only

Answer: A

Q25. Which of the following supplier’s financial statement is used to indicate the supplier’s
assets, liabilities and shareholder funds at a point in time?

a. Income statement
b. Balance sheet
c. Cash flow
d. Shareholder equity statement

Answer: B

Q26. When assessing supplier’s financial stability, it should be an area of concern for the buying
organisation if the supplier’s gearing is significantly low. Is this statement correct?

a. Yes, low gearing indicates highly risk due to long-term debts that the supplier has to pay
b. No, low gearing gives the organisation an opportunity to borrow money to meet their
obligations
c. Yes, low gearing impact on the organisations profitability and total revenues
d. No, low gearing indicates that organisation’s long –term funding is made more of equity
as compared to debt

Answer: D

Q27. Which of the following should be considered when calculating ratio relating to supplier’s
liquidity? Select the TWO that apply.

a. Receivables
b. Inventories
c. Equity
d. Profit
e. Reserves

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Answer: A and B

Q28. The drivers for using technology in the procurement processes are...

1. Increased quality
2. Increased efficiency
3. High levels of consistency
4. Reduced transparency

a. 1 and 4 only
b. 2 and 3 only
c. 1 and 3 only
d. 3 and 4 only

Answer: B

Q29. Which of the following items found in the supplier’s financial statement are relevant to
the gearing ratio?

1. Opening inventory
2. Long-term debt
3. Short-term investments
4. Shareholder equity

a. 1 and 4 only
b. 2 and 3 only
c. 2 and 4 only
d. 1 and 3 only

Answer: C

Q30. Gearing is a key financial measure of an organisation’s profitability. Is this statement

TRUE?

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 a. No, it considers the organisation’s balance of equity and debt
b. Yes, it is used to evaluate the organisation cost-to-income ratio
c. No, it is a ratio used to determine organisation’s liquidity
d. Yes, it relates to the relationship between profits and interests paid

Answer: A

Q31. Which of the following documents required for international exports and imports is a
document of title stating exactly what is require of those involved in transporting and
consigning goods until their point of delivery?

a. Insurance certificate
b. Certificate of origin
c. Carnet
d. Bill of lading

Answer: D

Q32. A large organisation is running a competitive tendering exercise which 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. Health and safety

b. Data protection
c. Discrimination
d. Product liability

Answer: B

Q33. Which of the following payment mechanism present a high level of risk for the supplying
organisation?

a. Cash in advance
b. Sight draft
c. Open account

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 d. Letter of credit

Answer: C

Q34. A buyer can mitigate the impacts of currency and exchange rate fluctuations through...

1. Currency choice
2. Use of local accounts
3. Currency hedging
4. Short-term contracts

a. 1 and 3 only
b. 2 and 3 only
c. 1 and 2 only
d. 3 and 4 only

Answer: A

Q35. Which of the following INCOTERMS 2020 carries the lowest risk for the buyer and the
highest risk for the supplier?

a. Free on board
b. Ex works
c. Delivered at terminal
d. Delivered duty paid

Answer: D

Q36. MOBICYCLES Motors is a South African company. They procure motorcycles from a
German company which they sell to their customers in South Africa. The two parties have
agreed a contract governed by the use of incoterms. The agreement is between the two parties
is that the supplier is responsible for ensuring that the ordered motorcycles are delivered at
MOBICYCLES Motor’s premises, including all custom clearances that apply and bearing all the
risks that occurs along the way. Which of the following is the INCOTERM used by the two
parties?

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 a. Delivered at place
b. Free alongside ship
c. Delivery duty paid
d. Cost and freight

Answer: A

Q37. . Modern business environment has been recently characterised by increasing rate of
globalisation and the need to acquire labour and resources from across the borders. This
increase can be accounted to easiness of companies to expand into new territories due to
formation of trading blocs and elimination of trade barriers. From the above statement, the
increased rate of globalisation has been caused by which of the following?

a. Cost drivers
b. Market drivers
c. Technological drivers
d. Political drivers

Answer: D

Q38. A procurement organisation has a complex and a 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. Strategic and e-auction

b. Routine and supplier negotiations
c. Bottleneck and framework agreement
d. Leverage and competitive tender

Answer: A

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Q39. Using a single sourcing arrangement is more likely to result in a high risk of supply
complacency due to which of the following?

a. Lack of competition
b. Consistent high prices
c. Introduction of innovative products
d. Availability of a wide of products

Answer: A

Q40. Which of the following are sources of added value that the buyer needs to take into
consideration?

1. Quantities
2. Superior quality
3. High safety stock levels
4. Good reputation

a. 1 and 3 only
b. 2 and 3 only
c. 1 and 2 only
d. 2 and 4 only

Answer: D

Q41. Which of the following are methods can be used to prevent the occurrence of bribe and
corruption in supply chains?

1. Whistle blowing
2. Terminating a relationship with a corrupt strategic supplier
3. Creating policies on the acceptance of gifts
4. Immediately firing employees who accept gifts and hospitality from suppliers

a. 1 and 3 only
b. 2 and 3 only

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 c. 3 and 4 only
d. 1 and 2 only

Answer: A

Q42. . Which of the following are ways in which procurement professionals can manage
language and cultural barriers when sourcing globally?

1. Thorough research about exchange rate fluctuations

2. Choosing location carefully and considering compatibility
3. Improving one’s foreign language skills
4. Ensuring proper documentation for all the imports to comply with regulations

a. 1 and 3 only
b. 2 and 3 only
c. 3 and 4 only
d. 1 and 2 only

Answer: B

Q43. Which of the following are ways of managing labour standards in the supply chain? Select
the THREE that apply.

a. Reducing the number of qualifications required for a job post

b. Developing effective policies applying to every organisation in the supply chain
c. Auditing the entire supply chain and their lower tiers to detect any issues which may
arise
d. Minimising stakeholder engagement in the process of identifying non compliance
e. Carrying out an ongoing training to increase the awareness of supply chain members
f. Charging higher prices for goods to ensure consistent salaries to workers

Answer: B, C and E

Q44. If a procurement professional believe that there are suspiciously low labour rates being
used within the supply chain, this should raise concern about which one of the following?

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 a. Fraudulent behaviour
b. Bribery
c. Modern slavery
d. Corruption

Answer: C

Q45. Which of the following are examples of fraud in a supply chain? Select the THREE that
apply.

a. Giving money to a procurement officer to influence his decision

b. Having a coffee with the supplier’s manager before a negotiation
c. Asking probing questions to put more pressure on the supplier
d. Setting a high invoice price to get the share of the money paid
e. Quoting higher prices to account for costs of production
f. Misuse of company assets for personal gain

Answer: A, D and F

Q46. An international airline has a contract for the supply of its staff uniforms. It is reviewing a
new potential supplier, but the airline has some concerns as to whether the new proposed
supply chain meets the airline high standards on ethical and responsible sourcing. How can the
airline ensure that all the supply chain parties meet its requirements?

a. Obtain questionnaires from all subcontractors

b. Undertake unannounced site visits
c. ensure all supply chain parties have a published code of conduct
d. Complete checks on sub-contractors websites

Answer: B

Q47. Procurement managers always have a role to play in effective abolition of fraud in the
supply chain. Is this statement true?

a. No, because procurement managers only needs to focus on the procurement tasks that
contributes towards overall business strategy

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 b. Yes, because fraud gives organisation an opportunity to implement policies to improve
their competitive advantage
c. No, because subordinates are the only people who can see fraud taking place
d. Yes, because fraud is a source of financial risk for the organisation and must be
eliminated at all costs

Answer: D

Q48. CBEF Manufacturers is a German mobile phone producer supplying its products to a
significant number of countries around the world. They use international sourcing strategy to
acquire most of their inputs for manufacturing. Which of the following are likely to affect CBEF
Manufacturers when acquiring their inputs?

1. Language and cultural difference

2. Quality issues
3. Higher input prices
4. Exchange rate risk

a. 1 and 4 only
b. 1 and 3 only
c. 2 and 4 only
d. 3 and 4 only

Answer: A

Q49. Is it a good practice to encourage whistle-blowing amongst employees working in the

supply chain if they suspect unethical behaviour in the supply chain?

a. No, because in many countries this will be illegal as it is confidential information

b. Yes, because they will always know if there is unethical behaviour
c. No, because there is usually no means of them doing so confidentially
d. Yes, because these staff are more likely to be aware of such malpractices

Answer: D

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Q50. Due diligence may be undertaken in which of the following ways?

1. Asking a few information about the supplier to check its compliance with regulations
2. Visiting the supplier’s premises to see its facilities, processes and personnel
3. Observing minor points regarding the supplier’s operations and activities
4. Asking the supplier to provide full information along with supporting documents

a. 1 and 2 only
b. 2 and 4 only
c. 1 and 3 only
d. 3 and 4 only

Answer: B

Q51. Which of the following are the main reasons for the buying organisation undertaking a
supplier development programme? To:

1. Reduce the price of raw materials for production

2. Strengthen working relationship with a supplier
3. Improve the supplier’s capabilities and competences
4. To improve market competition and leverage

a. 2 and 3 only
b. 1 and 2 only
c. 3 and 4 only
d. 2 and 4 only

Answer: A

Q52. Which of the following are regarded as the pillars of sustainability? Select the THREE that
apply.

a. Social factors
b. Political factors
c. Legal factors

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 d. Environmental factors
e. Economic factors
f. Ethical factors

Answer: A, D and E

Q53. Which of the following are regarded as potential benefits of responsible procurement?

1. Consistent supply security due to increased supplier base

2. Enhanced business reputation and customer loyalty
3. Cost savings due to the application of lifecycle costing
4. Reduction of staff retention for the organisation

a. 3 and 4 only
b. 1 and 3 only
c. 2 and 3 only
d. 2 and 4 only

Answer: C

Q54. . Is it sensible for a manufacturing organisation to consider developing a sustainable

procurement policy?

a. No, developing a sustainable procurement policy is costly and will negatively impact the
company’s profits
b. Yes, a sustainable procurement policy will help the organisation to consider the impact
of its activities on the environment
c. Yes, sustainable procurement policy ensures the organisation complies with
international legislation by minimising environmental pollution
d. No, the main objective of the organisation is to focus on maximising profits rather than
acting sustainably

Answer: B

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Q55. Modern slavery has been perceived as one of the issues impacting many supply chains. It
is therefore the role of both consumers and suppliers to work collaboratively toward effective
eradication of modern slavery in supply chains. Which of the following are the ways in which
consumers can tackle modern slavery?

1. Communicating with suppliers who use modern slavery about best operation practices
2. Boycotting the goods produced from modern slavery and child labour
3. Keeping close working relationship with suppliers to identify those who use modern
slavery
4. Buying products that have been certified fair trade

a. 1 and 3 only
b. 2 and 3 only
c. 3 and 4 only
d. 2 and 4 only

Answer: D

Q56. Which of the following are likely warning signs of modern slavery?

1. Workers being forced to work

2. Workers and staff receiving very low pay
3. Roles requiring few qualifications
4. An organisation renting small accommodation

a. 2 and 4 only
b. 1 and 2 only
c. 3 and 4 only
d. 1 and 3 only

Answer: B

Q57. Which of the following are the characteristics of tactical sourcing? Select the TWO that
apply.

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 a. Low-level decision making
b. High profit items
c. High-risk and capital items
d. Long-term projects
e. Transactional relationships

Answer: A and E

Q58. A requirement that has been sourced before by the organisation but requiring additional
features due to changes in customer preferences is known as which of the following type of
purchase?

a. New buy
b. Customised purchasing
c. Straight re-buy
d. Modified re-buy

Answer: D

Q59. Which of the following forces increases the intensity of competition in industry?

1. Buyer bargaining power

2. Threat of new entrants
3. Supplier bargaining power
4. Rivalry amongst existing competitors

a. 1 and 2 only
b. 3 and 4 only
c. 2 and 4 only
d. 1 and 3 only

Answer: C

Q60. Which of the following are regarded as the pre-condition for fraud in the supply chain?
Select the TWO that apply.

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 a. Due diligence of suppliers
b. Poor financial controls
c. Motive for fraudulent activities
d. Tight security measure
e. Effective logistical strategies

Answer: B and C

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