CIPS L4M4 Exam - Topic 3 Question 44 Discussion

Actual exam question for CIPS's L4M4 exam

Question #: 44
Topic #: 3

A company has a requirement for an item that has been identified as strategic on the positioning model. The company needs to invite competitive tenders and make sure the selected supplier of this item is in a good financial position. What should the company ask the suppliers to send to show that their current assets cover their current liabilities?

CProfit and loss account

AGearing ratio

BAcid test

DAnnual turnover

Show Suggested Answer

Suggested Answer: B

The acid test, also known as the quick ratio, measures a company's ability to cover its current liabilities with its most liquid assets, excluding inventory. It is a stringent indicator of short-term financial health. By requesting this ratio, the company can assess whether a potential supplier has sufficient liquidity to meet its obligations, which is crucial when procuring strategic items.

CIPS Level 4 Diploma in Procurement and Supply, L4M4 Study Guide, Section 2.3: Financial Appraisal of Suppliers

by Clay at Jan 29, 2026, 03:32 AM

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Geraldine

15 days ago

Isn't a balance sheet just a snapshot? Not always reliable.

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Kristian

20 days ago

What if the supplier has hidden debts?

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Ben

26 days ago

Totally agree, a balance sheet shows that info!

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Malcom

1 month ago

They should ask for a balance sheet.

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Ashlyn

1 month ago

The company should ask for the suppliers' credit scores too. Gotta make sure they're not just good on paper, you know?

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Janine

1 month ago

The current ratio is the way to go. Anything else is just overkill. Keep it simple, folks!

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Juan

2 months ago

Haha, the company should just ask for the suppliers' bank statements. That'll really show how much cash they have on hand!

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Mel

2 months ago

I'd say the suppliers should send their balance sheet. That'll show the company the full picture of their financial position.

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Sanjuana

2 months ago

Definitely, the current ratio is the way to go. Gotta make sure those suppliers can cover their bills!

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Mabelle

2 months ago

The company should ask the suppliers to send their current ratio, which is the ratio of current assets to current liabilities.

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Tammara

2 months ago

I believe they should definitely ask for a cash flow statement too, just to get a clearer picture of their liquidity.

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Barney

2 months ago

I feel like they might need to ask for recent financial statements, but I can't recall if they should specify quarterly or annual reports.

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Ronny

3 months ago

I remember practicing a question like this where we discussed financial ratios. Maybe they should request the current ratio as well?

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Man

3 months ago

I think the company should ask for the suppliers' balance sheets to see their current assets and liabilities, but I'm not entirely sure if that's enough.

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Maryann

4 months ago

Ah, I've got this. The company is looking for a way to assess the suppliers' financial stability, so they'll probably want to see the current ratio or another liquidity metric that shows the suppliers can cover their current liabilities with their current assets.

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Dudley

4 months ago

This is a good one. The key is that the company wants to make sure the selected supplier is in a strong financial position, so they'll likely ask for the current ratio or something similar to evaluate the supplier's liquidity and ability to meet their short-term debts.

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Lorean

4 months ago

Wait, what's the current ratio again? I'm a little fuzzy on the financial ratios. Maybe I should quickly review those before the exam to make sure I'm prepared for questions like this.

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Linsey

4 months ago

Okay, I think I know what they're looking for here. The company wants to see the suppliers' liquidity, so they'll probably need to provide their current ratio or some other measure of their ability to cover short-term obligations.

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Marcos

4 months ago

Hmm, this seems like a straightforward question about assessing a supplier's financial health. I'd probably ask them to provide their current ratio, which is the ratio of current assets to current liabilities.

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