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:

Investopedia Commentary

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.

Related Links

Convertible Bonds: An Introduction
Advantages Of Bonds
Introduction To Convertible Preferred Shares

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

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.