CPM Global Sourcing and International Procurement 2

Question 1

When managing currency risk in international procurement, a purchasing manager uses a forward contract primarily to:

Accepted Answer

Lock in an exchange rate today for a transaction that will occur in the future

Answer

A forward contract allows a buyer to fix the exchange rate for a future currency transaction, protecting against unfavorable fluctuations in exchange rates between contract signing and payment.

Question 2

Which payment term is generally considered least risky for the U.S. buyer when purchasing from a new international supplier?

Accepted Answer

Open Account (Net 30)

Answer

Open Account terms are most favorable to the buyer because payment is made after goods are received and inspected, placing the credit risk on the supplier rather than the buyer.

Question 3

A Certificate of Origin in international trade is used to:

Accepted Answer

Establish the country where goods were manufactured to determine applicable tariff rates

Answer

A Certificate of Origin documents the country in which goods were produced, which is used by customs authorities to determine the applicable tariff rate and whether preferential trade agreement rates apply.

Question 4

When evaluating a foreign supplier's total cost, which factor related to lead time should a procurement manager consider beyond the quoted price?

Accepted Answer

Inventory carrying costs associated with longer international lead times

Answer

Longer international lead times require buyers to hold more safety stock, increasing inventory carrying costs, which must be factored into the true total cost of international sourcing.

Question 5

Which organization sets the internationally recognized Incoterms rules used in global trade contracts?

Accepted Answer

International Chamber of Commerce (ICC)

Answer

The International Chamber of Commerce (ICC) publishes and updates Incoterms rules, which define the responsibilities of buyers and sellers for delivery, risk, and costs in international trade transactions.

CPM - Certified Purchasing Manager Practice Test

CPM - Certified Purchasing Manager Practice Test

CPM Global Sourcing and International Procurement 2