Conversion Ratio Law and Legal Definition

Conversion Ratio is mainly applied to convertible securities. It is the number of common shares into which a convertible security may be converted. It can also be the ratio of the face amount of the convertible security to the conversion price. The higher the ratio, the higher the number of common shares exchanged per convertible security. Generally, 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. The ratio for a convertible security is calculated by dividing the face value of the convertible security by the conversion price.