The sales backlog ratio is an asset utilization metric that allows analysts to understand if a company is able to maintain its current level of production. Sales backlog is typically used by company management to track performance, since companies normally do not release their backlog of orders to the public.
Sales Backlog Ratio = Backlog of Orders / Sales
Note: the sales backlog ratio can be stated in either dollars or units. It's also a metric that should be tracked over time using relatively short intervals. For example, the company's management team may measure this ratio on a monthly or quarterly basis.
The sales backlog ratio provides company analysts with insights into the company's ability to maintain current levels of production. The company's management team would use this information to make short or longer term adjustments to production capacity.
For example, if the ratio is decreasing over time, this indicates the company is over-producing relative to sales. Fixed costs would then represent a larger share of production costs, and the company's profit margins would decrease. On the other hand, if the ratio were increasing over time, this indicates production is not keeping up with demand. If the company didn't take action to increase production, the backlog of orders could result in delays in providing customers with product.
Although this information could also be used by the investor-analyst, companies typically do not release this information to the public. It's also important to understand if demand for a product is seasonal. If that's true, large swings in this metric might be considered normal.
Company A's management team wanted to understand if the backlog of sales was increasing or decreasing over time. The company's analysts produced the following table, and presented it to their production management team:
| Month 1 | Month 2 | Month 3 | Month 4 |
| Rolling Sales (3 Months) | 15,125 | 15,503 | 15,891 | 16,288 |
| Backlog (Month End) | 11,344 | 11,400 | 11,457 | 11,515 |
| Sales Backlog Ratio | 0.75:1 | 0.74:1 | 0.72:1 | 0.71:1 |
As the above table indicates, the sales backlog ratio for Company A has been decreasing over time, which aligns well with the process improvements they've instituted.
sales to administrative expense ratio, sales per employee, sales to fixed assets, sales to working capital, maintenance to fixed assets ratio, accumulated depreciation to fixed assets ratio
Explore Investing Further
Trading has never been easier, thanks to the rise of online platforms that enable you to buy and sell various assets at the click of a button. But with so many options available, it can be challenging to decide which platform is right for you.
*Plus500 disclaimer: Beginners are advised to use the demo account and the Trading academy to gain experience before trading with real capital due to the risks involved
Looking for a way to avoid swap fees while trading forex?
By providing instant diversification for your portfolio, investing in ETFs can amplify the potential of any investor, novice or seasoned alike. We scoped the market to curate a list of the best ETF trading platforms available for US investors.
Our top beginner's pick for copy trading is eToro. Read on for more details, plus seven good alternatives.
Swing trading stocks can be a great way for investors to take advantage of short-term stock market movements and gain significant returns. If you're interested in swing trading, the key to success lies in selecting the right stocks to buy and sell quickly for a profit.
The table below lists the best stock picks under $2, listed on public exchanges.
The table below lists the best stock picks under $1, listed both on public and OTC exchanges.
This section will highlight the best EV-trading penny stocks available in the United States.
The demand for sustainable energy has grown rapidly in recent years. This has resulted in increased scrutiny of the automotive market. As a result, the electric vehicle (EV) industry has made significant advancements.
Intelligent Bio Solutions Inc. is a life sciences company, founded in 2016 with headquarters in New York and is engaged in performing diagnostic tests, real-time monitoring, and non-invasive surgery for its patients. The firm has developed a CoV-2 Biosensor, which can be used in RNA virus detection.
Hour Loop was founded in 2013 with headquarters in Redmond, Washington. It’s an online retailer involved in e-commerce in the United States that hit the public markets on Jan 7th of 2022. The company sells home/garden decor, electronic products, kitchenware, and apparel through walmart.com, amazon.com, and hourloop.com.
.jpg)
