Book-to-Bill Ratio

Book to Bill

A ratio of orders taken to invoices sent over a set period of time. In other words, a book-to-bill ratio compares current customers (orders taken) to previous customers (invoices sent). This is a tool used to calculate whether demand for a good or service is rising or falling. A book-to-bill ratio of less than one indicates falling demand, while a ratio of greater than one shows growth, after accounting for seasonal or other fluctuation. The semi-conductor industry makes particular use of this ratio.

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book-to-bill ratio

The dollar amount of orders on the books compared to the dollar amount of orders filled. A high ratio indicates a backlog of orders that should produce revenues and profits in future periods. The book-to-bill ratio is often used to analyze the health of technology companies.