Definition of 'Book-To-Bill Ratio'
The ratio of orders received to units shipped and billed for a specified period, generally a month or quarter. The book-to-bill ratio is a widely used metric in the technology industry, specifically in the semiconductor equipment sector. It is closely watched by investors and analysts for an indication of the performance and outlook for individual companies and the technology sector. A ratio of above 1 implies that more orders were received than filled, indicating strong demand, while a ratio below 1 implies weaker demand.
Investopedia explains 'Book-To-Bill Ratio'
For example, a book-to-bill ratio of 1.10 implies that $110 of orders were received for every $100 of product billed during the period.
One of the best-known book-to-bill ratios is the monthly figure released by the Semiconductor Equipment and Materials Institute (SEMI). This is a three-month average bookings and billings figure for semiconductor equipment companies with headquarters in North America, and is a reliable indicator of trends in the worldwide semiconductor industry.