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CIPS L5M2 Exam (page: 3)
CIPS Managing Supply Chain Risk
Updated on: 31-Mar-2026

Viewing Page 3 of 25
L5M2 PDF 120 Questions

Neruda Incorporated is evaluating potential suppliers' financial standings as part of a tender.
Which of the following companies is the most financially stable?

  1. Company A has a high gearing ratio, high liquidity and few fixed assets
  2. Company B has low liquidity, a high gearing ratio and increasing sales trends
  3. Company C has low liquidity, low gearing and increasing sales trend
  4. Company D has high liquidity, low gearing and lots of fixed assets

Answer(s): D

Explanation:

Company D is the strongest. You want a company with high liquidity (this means they can easily pay any debts) and low gearing (meaning that their company isn't financed by debt). This question comes from p.24 of the CIPS study guide. It doesn't go into a lot of detail on financial ratios and gearing, as this was covered in Level 4. If you're rusty on financial ratios and gearing I recommend revising these before the exam.



Which of the following statements is true about ISO9001? Select TWO.

  1. it is based on the principle of continuous improvement
  2. it encourages businesses to see quality from the viewpoint of the customer
  3. it aims to ensure sustainability within the supply chain
  4. It complements ISO 20400
  5. it helps businesses to identify areas of potential risk and mitigate these accordingly

Answer(s): A,B

Explanation:

ISO 9001 is Quality Management- answers 1 and 2 are correct. ISOs are a popular topic on this exam so be sure to revise them - and not only what the names of them are, but also the principles behind each ISO. ISO 9001 is discussed on p. 25 of the CIPS study guide.



Which of the following is a method for approaching risks?

  1. tolerate
  2. translate
  3. transport
  4. take out

Answer(s): A

Explanation:

Tolerate is one of the 4 Ts. This is a popular exam question so do learn the 4 Ts: Tolerate, Treat, Transfer and Terminate. See p.32.



What is the purpose of the Sarbanes-Oxley Regulation?

  1. to protect the environment
  2. to ensure high levels of ethical practice with regards to working conditions
  3. to encourage transparency in financial reporting
  4. to ensure that products that reach the market are fit for purpose

Answer(s): C

Explanation:

Sarbanes Oxley Regulations encourages transparency in financial reporting. The regulations came in response to the Enron scandal in 2001 when Enron bosses were falsifying financial records to make the company look better than it was, then the company went bust. The point of Sarbanes Oxley is to ensure that this doesn't happen again- that business leaders report correct financial statements to shareholders. The study guide talks about this on p.42 but I'd recommend also watching this video as it gives a good background to the regulation:
https://www.investopedia.com/terms/s/sarbanesoxleyact.asp



Company X is a large manufacturer of cosmetics and household products. It operates in 57 different countries and has large and complex supply chains. The brand's popularity is partly due to the cheap price of the products compared with its competitors and Company X has recently discovered that child labour has been used within its supply chain. In response to this Company X has donated a large amount of money to charity.
What is this an example of?

  1. corporate social responsibility
  2. greenwashing
  3. triple bottom line thinking
  4. business continuity planning

Answer(s): B

Explanation:

This is Greenwashing. Greenwashing is the process of using a good deed to cover up unethical responsibility. See p. 45. In this example Company X has thrown some money at a charity in order to cover up the fact it has child labour issues within the supply chain. See https://en.wikipedia.org/wiki/Greenwashing



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