CIPS L3M1 PROCUREMENT
AND SUPPLY
ENVIRONMENTS
PRACTICE TEST 60
QUESTIONS
Question 1: An entrepreneur owns a small consultancy alone, keeps the pro�ts after tax, and is personally responsible for the business debts. Which type of private sector organisation is this?
Choices:
1) A sole trader 2) A public corporation 3) A registered charity 4) A multinational company
Correct Answer: A sole trader
Explanation: A sole trader is owned by one individual. In the usual sole-trader structure the owner receives the pro�ts and has personal responsibility for business liabilities.Page 1
Question 2: A procurement manager reviews political developments, in�ation, demographic change and emerging technology before preparing a sourcing plan.What activity is being undertaken?
Choices:
1) Environmental scanning 2) Invoice matching 3) Supplier payment approval 4) Stock counting
Correct Answer: Environmental scanning
Explanation: Environmental scanning systematically reviews external factors that may create risks or opportunities for the organisation and its procurement activity.
Question 3: Which organisational characteristic most clearly distinguishes an
incorporated company from an unincorporated business?
Choices:
1) It must operate internationally 2) It has a legal identity separate from its owners 3) It cannot employ sta� 4) It is funded mainly by taxation
Correct Answer: It has a legal identity separate from its owners
Explanation: Incorporation creates a separate legal entity. The company can own assets and enter contracts in its own name, distinct from its shareholders or members.Page 2
Question 4: A supplier agrees to deliver 10,000 units at a �xed total price for the contract period with no adjustment clause. If the supplier's input costs rise unexpectedly, who normally bears the direct pricing risk?
Choices:
1) The buyer only 2) The end customer only 3) The supplier 4) The buyer and supplier equally by de�nition
Correct Answer: The supplier
Explanation: Under a �rm �xed-price arrangement, the agreed price does not change because the supplier's costs rise. The supplier therefore bears the direct risk of cost increases unless the contract provides an adjustment mechanism.
Question 5: Which factor is included in a PEST analysis?
Choices:
1) Internal sta� appraisal scores 2) Economic conditions 3) Warehouse bin locations 4) Purchase order numbering
Correct Answer: Economic conditions
Explanation: PEST examines Political, Economic, Social and Technological factors in the external environment.Page 3