Book To Ship Ratio

Definition of 'Book To Ship Ratio'


The demand-supply ratio of the amount that is recorded in the company's books to the amount of inventory it has shipped out. This ratio can be used to help measure a company's efficiency, and can be used to indentify potential problems in the supply chain.

Investopedia explains 'Book To Ship Ratio'


If the ratio is greater than one, it indicates that the company has not sent out all orders. This could indicate a shortage/backorder of needed supplies. If it is one, the company is directly on time, and if below one, the company has excess inventory on hand. For example, if incoming orders for the quarter was $50 million and shipments for the quarter was $100 million, the book to ship ratio is 50%. If this company is making a simple product like widgets, which have quick turnaround times from order to shipment, then this low book-to-ship ratio could be indicative of problems in either manufacturing or shipping.



comments powered by Disqus
Hot Definitions
  1. Federal Reserve Note

    The most accurate term used to describe the paper currency (dollar bills) circulated in the United States. These Federal Reserve Notes are printed by the U.S. Treasury at the instruction of the Federal Reserve member banks, who also act as the clearinghouse for local banks that need to increase or reduce their supply of cash on hand.
  2. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  4. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  5. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  6. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
Trading Center