Book To Bill Ratio is a measure to compare the number of new orders received against total orders received by the business in the particular period under consideration. A Book To Bill Ratio of 1 or more means that there is a quick movement from raising demand to closing the orders and hence indicates good demand.
Calculation of Book To Bill Ratio
Book To Bill Ratio is calculated as: Book To Bill Ratio = New orders received/total orders received or shipped
Uses of Book To Bill Ratio
Some uses of Book to Bill ratios are:
a) It gives an idea about the demand and supply for certain industries.
b) A Book To Bill Ratio of less than 1 may indicate declining demand.
c) A high ratio (more than 1) for certain industries might signify good business operations, high demand, increasing customers and thus a good investment proposition.
