The conversion ratio is the crucial factor that determine the value and attractiveness of the convertible bonds. A low conversion ratio means that the bondholder will receive fewer share per bond when they convert, making the conversion less attractive. A convertible bond is an elastic kind of finance offered to a corporation. A convertible bond grants the investor a kind of hybrid security; that is, it makes payments in interest for a bond while at the same time making the possibility of owning stock real. The conversion ratio of this bond determines how many shares of stock you would get from converting one bond. For instance, 5:1 means that one bond would convert to five shares of common stock.