Book to bill

New orders won divided by revenue recognised in the same period. Above one, the order book is growing.

An information technology services firm booking ₹1,320 crore against ₹1,200 crore of revenue reports 1.1.

The measure is a leading indicator of revenue because today's bookings are next year's billings. A ratio below one for several consecutive quarters means revenue will decline, whatever the current growth rate says.

The complication is duration. A large multi-year deal inflates bookings in the quarter it is signed and converts to revenue over five years, so a single quarter's figure can mislead in both directions.

Use a four-quarter rolling ratio.