CIPS L4M4 Exam - Topic 3 Question 44 Discussion

Actual exam question for CIPS's L4M4 exam

Question #: 44
Topic #: 3

[All L4M4 Questions]

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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Ronny

5 days 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

10 days 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

15 days 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

20 days 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

26 days 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

1 month 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

1 month 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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