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Preparing for the L4M2 Exam requires a significant amount of study and practice. CIPS offers a variety of study materials, including textbooks, e-learning modules, and practice exams. Candidates should also seek out opportunities to gain practical experience in procurement and supply chain management, as this will help them to better understand the concepts covered in the exam.
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CIPS L4M2 (Defining Business Needs) Exam is a vital certification for professionals in the procurement and supply chain industry. L4M2 course is designed to equip individuals with the knowledge and skills required for effectively identifying and defining business needs. Defining Business Needs certification is recognized globally and is highly valued by employers as it demonstrates an individual's ability to contribute to the success of an organization.
NEW QUESTION # 48
Jasmine identified a possible new supplier that offers commercial improvements in her category of spend. She decided to put forward a business case to justify the necessity for a new supplier assessment and audit with the aim of adding the supplier to the approved list. Jasmine decided to carry out a cost-benefits analysis. Is this the right approach for Jasmine to use?
Answer: A
NEW QUESTION # 49
Ethan is the newly appointed CEO of ATT Group. He sees that the company is wasting financial resources on unnecessary spends. To solve this problem, Ethan requires all functional managers to prepare their department budget from scratch. Each spend must have justification or it will not be approved. Which budgeting method is Ethan using?
Answer: C
Explanation:
There are four common types of budgets that companies use: (1) incremental, (2) activity-based, (3) value proposition, and (4) zero-based.
Incremental budgeting takes last year's actual figures and adds or subtracts a percentage to obtain the current year's budget. It is the most common method of budgeting because it is simple and easy to understand.
Activity-based budgeting is a top-down budgeting approach that determines the amount of inputs required to support the targets or outputs set by the company. For example, a company sets an out-put target of $100 million in revenues. The company will need to first determine the activities that need to be undertaken to meet the sales target, and then find out the costs of carrying out these ac-tivities.
In value proposition budgeting, the budgeter considers the following questions:
- Why is this amount included in the budget?
- Does the item create value for customers, staff, or other stakeholders?
- Does the value of the item outweigh its cost? If not, then is there another reason why the cost is justified?
Value proposition budgeting is really a mindset about making sure that everything that is included in the budget delivers value for the business. Value proposition budgeting aims to avoid unneces-sary expenditures
- although it is not as precisely aimed at that goal as our final budgeting option, zero-based budgeting.
As one of the most commonly used budgeting methods, zero-based budgeting starts with the as-sumption that all department budgets are zero and must be rebuilt from scratch. Managers must be able to justify every single expense. No expenditures are automatically "okayed". Zero-based budgeting is very tight, aiming to avoid any and all expenditures that are not considered absolutely essential to the company's successful (profitable) operation. This kind of bottom-up budgeting can be a highly effective way to "shake things up".
This is the method used in the scenario.
Reference:
- CIPS study guide page 58
- Types of Budgets - The Four Most Common Budgeting Methods (corporatefinanceinstitute.com) LO 1, AC 1.4
NEW QUESTION # 50
Which of the following always impact negatively on a company's cash flow? Select TWO that ap-ply
Answer: B,E
Explanation:
To answer this question, candidates are required to remember the cash flow cycle and cost entries as well as the impact of their timing on a business.
Source: https://cfoperspective.com/free-your-cash-trapped-in-the-cash-conversion-cycle/ Shorter payment term and more inventory are likely to have negative impact on the cash flow be-cause the buyer has to pay sooner and greater.
"Customers agree to pay immediately" will increase the organisation's bank account sooner.
Depreciation has no impact on cash flow as it is only listed in Profit and Loss statement.
Increasing revenue may have negative or positive impact on cash flow, depending on the real situation.
Reference:
LO 1, AC 1.4
NEW QUESTION # 51
To improve the productivity, Plantation Ltd is planning to purchase a tractor, which it has never bought before. The project must be quick to catch up with the next growing season. Leanne, a jun-ior procurement staff at the company, assumes that she could skip market analysis stage to save time. Is this assumption reasonable?
Answer: B
Explanation:
Market analysis is a stage in CIPS Procurement and Supply Cycle. This stage informs the purchaser about the number of suppliers, the average pricing, and product trends. Even urgent purchase should undergo market analysis. Without undertaking this stage, the buying organisation may not purchase the right product, or they may purchase at higher price.
Reference:
LO 2, AC 2.1
NEW QUESTION # 52
Which of the following are fixed costs? Select TWO that apply.
Answer: C,E
NEW QUESTION # 53
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