What is a Conversion Ratio?
Conversion ratios are simple calculations that refer to the ratio of common shares of stock that are received from the conversion of a convertible security. Using the data that is provided at the time of the purchase of the security, it is possible to determine how many shares of common stock would be accrued if the conversion takes place at a given point in time. Investors often use the process of a conversion ratio to monitor the status of a convertible security in light of current market conditions. The information required to perform a basic conversion ratio is simple. The formula requires the current par value of the convertible security, and the conversion price of equity. Using these two pieces of information, it is possible to determine how many shares of stock would result if the conversion clause that is part of the terms and conditions of the security were invoked. Depending on the current conditions of the market and the projected future performance of the stock, the conver
Because the term is used in several different ways, it’s important to define it right off the bat. I’m going to use a fairly broad definition that highlights the usefulness of the conversion ratio as an all-purpose tool for measuring the effectiveness of various campaign types. A conversion ratio is the number of times a desired action is taken, presented as a proportion of the number of opportunities for the action to be taken. That definition is a mouthful. Why so complicated? Two reasons. First thinking of conversion ratios this way will guide you toward using them correctly. And second this definition is general enough to apply to many different marketing scenarios. Conversion ratios can help measure the following: • How effectively your Web site induces visitors to spend money on the site • How successful your Web site is at attracting new sign-ups • To what degree a link drives users toward desired content …and countless variations on those themes. Finding the Right Ratio Let’s
