Practice Test Geeks(APP) Accredited Purchasing Practitioner Certification Practice Test
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Financial Analysis & Reporting Flashcards

7 cards from real APP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Analysis & Reporting flashcards as text

  1. A supplier offers payment terms of '2/10 net 30.' What is the approximate annualized cost of NOT taking the early payment discount?

    Answer: 36%

    The annualized cost is approximately 36% (2% / 98% × 365/20), making it expensive to forgo the discount if low-cost financing is available.

  2. Which financial statement best reveals whether a profitable company is actually generating cash?

    Answer: Statement of cash flows

    A company can show accounting profit but consume cash; the cash flow statement reveals actual cash generation from operations, investing, and financing.

  3. In procurement negotiations, understanding a supplier's 'contribution margin' helps you determine:

    Answer: How much each unit sold contributes to covering fixed costs after variable costs

    Contribution margin (price minus variable cost) shows the per-unit profit available to cover fixed overhead, revealing pricing floor in negotiations.

  4. A should-cost model is primarily used in procurement to:

    Answer: Estimate what a product should cost based on materials, labor, overhead, and profit

    Should-cost modeling builds up an independent cost estimate to establish a credible negotiation target and identify supplier cost drivers.

  5. Which of the following best describes 'landed cost' in international procurement?

    Answer: The total cost including purchase price, freight, insurance, duties, and customs fees

    Landed cost captures all costs to get goods to the destination, enabling accurate total price comparisons across domestic and international suppliers.

  6. Return on investment (ROI) for a procurement initiative is best expressed as:

    Answer: (Net benefit – Investment cost) ÷ Investment cost × 100

    ROI divides the net benefit (benefits minus costs) by the investment cost, expressing the return as a percentage of what was spent to achieve it.

  7. When conducting supplier financial risk assessment, a Z-score (Altman) below 1.81 indicates:

    Answer: High probability of financial distress or bankruptcy

    Altman's Z-score below 1.81 places a company in the 'distress zone,' indicating significant risk of bankruptcy within two years.