Conversion ratio

Definition:

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.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Competition ahead

Often used in risk arbitrage. Situation whereby another OTC market maker has transacted with investment bank at the stated market level before the bid/offer has been made.

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