CandleFocus

Book-to-Bill

Candlefocus Editor
Book-to-bill is a key measure of business performance and future performance in the technology sectors, such as semiconductors and computer software suppliers. The Book-to-Bill ratio, also known as the Book/Bill ratio, is the ratio of orders received in a particular period (“bookings”) to the sales invoiced during that period (“billings”). It is used as an indicator of current and future sales for a particular industry or sector, as well as to track how demand for goods or services changes over time. It is calculated by taking the total number of orders received during a certain period, divided by the total number of sales invoiced during that period.

The Book-to-Bill ratio is a useful indicator in sectors where the demand for goods and services fluctuates significantly from month to month. In these commercial environments, the Book-to-Bill ratio can indicate whether the overall sales trend is increasing or decreasing. A ratio above one (1.0) indicates that more orders were received than filled, indicating strong demand. A ratio below one means more orders were shipped than received during the period, indicating diminishing demand.

In addition to its utility for companies in certain industries, the Book-to-Bill ratio can also be used to provide an indication of the overall health of the particular sector or economy. This is because the ratio can give a good indication as to whether or not companies are getting enough orders to cover their operating costs, remain profitable, and/or grow their business. As such, investors closely track Book-to-Bill ratios to gain insight into the overall performance of their investments.

In conclusion, the Book-to-Bill ratio is an important tool used to provide an indication of the current and future demand for goods and services within certain industries. It is a helpful way to monitor and identify changes in demand on a regular basis to help companies and investors make informed decisions.

Glossary Index