Book To Ship Ratio

AAA

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.

RELATED TERMS
  1. Time Charter Equivalent - TCE

    A shipping industry standard used to calculate the average daily ...
  2. Both-To-Blame Collision Clause

    Part of the Ocean Marine Insurance policy that states that if ...
  3. Inventory

    The raw materials, work-in-process goods and completely finished ...
  4. Perpetual Inventory

    A method of accounting for inventory that records the sale or ...
  5. Inventory Turnover

    A ratio showing how many times a company's inventory is sold ...
  6. Carrying Cost Of Inventory

    This is the cost a business incurs over a certain period of time, ...
RELATED FAQS
  1. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  2. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  3. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  4. How can EV/EBITDA be used in conjunction with the P/E ratio?

    Because they provide different perspectives of analysis, the EV/EBITDA multiple and the P/E ratio can be used together to ... Read Full Answer >>
  5. How can a company reduce the unsystematic risk of its own security issues?

    Companies can reduce the unsystematic risk of their own security issues simply by doing the most effective job possible of ... Read Full Answer >>
  6. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
Related Articles
  1. Active Trading

    Fibonacci And The Golden Ratio

    Discover how this amazing ratio, revealed in countless proportions throughout nature, applies to the financial markets.
  2. Insurance

    Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.
  3. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  4. Fundamental Analysis

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  5. Markets

    How To Use Price-To-Sales Ratios To Value Stocks

    Take a look at how this effective ratio can be influenced by certain critical factors.
  6. Forex Education

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  7. Forex Education

    How To Use The P/E Ratio And PEG To Tell A Stock's Future

    While the price-to-earnings ratio is commonly used for assessing stock prices, the price/earnings-to-growth ratio offers forecasting advantages that investors need to know.
  8. Fundamental Analysis

    Dynamic Current Ratio: What It Is And How To Use It

    Learn why this ratio may be a good alternative to the current, cash and quick ratios.
  9. Bonds & Fixed Income

    How To Use Gross National Product As An Indicator

    Learn what the GNP truly represents, and how its misuse can manipulate the facts.
  10. Savings

    Inflation for Dummies

    Inflation may seem like a straightforward concept, but it is more complex than it appears. We examine its varieties and causes.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!