Homebuilding Financial Reporting - Net new Orders vs. Backlog
Currently an undergrad assigned to analyze a national homebuilder for a project and am unfamiliar with some terminology. Looking at the 10K for this company (PHM) I am having a hard time distinguishing between what they list as Net New Orders vs. Backlog. From my understanding, Backlog includes all customer contracts in which a deposit has been put down for the home, but for which the sale has not closed. I understand that Net New Orders would then include all new orders for homes less order cancellations. However, Backlog volume is much less than new order volume (almost always about 50-60% of new order volume). Would this mean that a new order does not constitute backlog unless a contract is signed?
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