conversion ratio

Conversion Ratio

The number of common shares received at the time of conversion for each convertible security. It is calculated by using this formula:

Notes:

The higher the ratio, the higher the number of common shares exchanged per convertible security. The conversion ratio is determined at the time the convertible security is issued and will have an impact on the relative price of the security.

See also: Contingent Convertibles - CoCos, Conversion, Conversion Price, Convertible Bond, Convertible Preferred Stock, Mandatory Convertible, Par Value

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Conversion ratio

Applies mainly to convertible securities. Relationship that determines how many shares of common stock will be received in exchange for each convertible bond or preferred stock when a conversion takes place. It is determined at the time of issue and is expressed either as a ratio or as a conversion price from which the ratio can be figured by dividing the par value of the convertible by the conversion price.

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conversion ratio

The number of shares of stock into which a convertible security may be exchanged. The ratio for a convertible bond is calculated by dividing the principal amount of the bond by the conversion price.