CPIM Practice Exam

What does the projected available balance (PAB) represent?

1. An inventory balance projected into the past

2. The remaining payments due on an account

3. An aggregate of future cash flow

4. An inventory balance projected into the future

The correct answer is: An inventory balance projected into the future

The projected available balance (PAB) is a forward-looking measure that reflects the anticipated inventory levels over a specified future period. It is calculated based on current inventory on hand, incoming supply (restock), and outgoing demand (sales or usage), allowing an organization to plan its inventory management effectively. By projecting into the future, the PAB helps businesses assess whether they will have enough inventory to meet customer demand, avoid stockouts, or identify potential overstock situations. This forecast enables proactive decision-making regarding purchasing, production schedules, and resource allocation, ensuring that inventory management aligns with overall supply chain objectives. While projecting with historical data is important for analysis, the essence of PAB is its focus on future inventory positions, which is why it is the most accurate representation of effective inventory management planning.