Book To Bill Ratio
The Book to Bill ratio is a metric used to assess the demand and supply dynamics of a company's products or services. It is calculated by dividing the total value of new orders received by the total value of orders billed. The formula is: Book to Bill Ratio = Total Worth of New Orders Received / Total Worth of Orders Billed. This ratio helps companies gauge future demand relative to current production levels. - A Book to Bill ratio greater than 1 indicates higher demand than supply, suggesting the company is receiving more new orders than it is fulfilling, potentially signaling growth opportunities. - A Book to Bill ratio less than 1 indicates lower demand than supply, suggesting excess inventory or reduced demand for products. By analyzing this ratio, companies can adjust production levels to align with market demand.
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