Conversion Ratio

AAA

DEFINITION of 'Conversion Ratio'

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

Conversion Ratio

INVESTOPEDIA EXPLAINS 'Conversion Ratio'

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 TERMS
  1. Par Value

    The face value of a bond. Par value for a share refers to the ...
  2. Market Conversion Price

    An investor's effective cost to purchase common stock when it ...
  3. Conversion

    The exchange of a convertible type of asset into another type ...
  4. Irredeemable Convertible Unsecured ...

    A type of security that can be used to purchase underlying common ...
  5. Contingent Convertibles - CoCos

    A security similar to a traditional convertible bond in that ...
  6. Conversion Price

    The price per share at which a convertible security, such as ...
RELATED FAQS
  1. Can preferred stocks be traded like common stocks? Are their prices the same?

    First, let's look at the differences and similarities between common stocks and preferred stocks. Both represent a piece ... Read Full Answer >>
  2. What are 'death spiral' convertible bonds?

    Conventional convertible bonds give the bondholder the right to exchange the bond for a certain amount of the issuer's common ... Read Full Answer >>
  3. What type of asset allocation should I use if I am already retired?

    Among investors, asset allocation is a topic of discussion that receives a great deal of weight during the asset accumulation ... Read Full Answer >>
  4. Is a company's paid in capital affected by the trading of its shares in the secondary ...

    The amount of paid-in capital a company has is not affected by the trading of its shares on the secondary market. Paid-in ... Read Full Answer >>
  5. What happens to the price of a premium bond as it approaches maturity?

    The price of a premium bond will decrease toward par value as the bond approaches maturity. Premium Bonds Vs. Discount Bonds All ... Read Full Answer >>
  6. What is the importance of calculating tax equivalent bond yield?

    Fixed-income investors measure portfolio returns using yields. Since most bonds do not produce high returns like equity markets, ... Read Full Answer >>
Related Articles
  1. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  2. Bonds & Fixed Income

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  3. Bonds & Fixed Income

    Leverage Your Returns With A Convertible Hedge

    Find out how you can maintain your income stream by using this type of bond strategy.
  4. Bonds & Fixed Income

    Convertible Bonds: An Introduction

    Find out about the nuts and bolts, pros and cons of investing in bonds.
  5. Stock Analysis

    Whole Foods Pricing: Mistake or Misdeed?

    Whole Foods Market might soon find itself in the middle of a public relations nightmare. But will its share price suffer?
  6. Professionals

    Is a Bond Market Selloff Coming?

    A big investment management company is concerned about bond market conditions and allocating more capital to cash. Should you follow?
  7. Professionals

    Indexing vs. Stock Picking: Which is Better Now?

    Indexing and stock picking both have positive and negative features. One has outperformed the other historically, but which is the better option right now?
  8. Stock Analysis

    Whole Foods: How Will Shares React to Price Probe?

    Why it's important to look beyond the recent headlines about Whole Foods Market and accusations of pricing problems in New York.
  9. Stock Analysis

    What's Worth More: Walmart or Facebook?

    Which company is worth more, Walmart or Facebook? The answer may come as a surprise.
  10. Investing Basics

    Explaining Tender Offers

    A tender offer is a broad public offer made by a person or company to purchase all or a portion of the shares of a publicly traded company.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!