An entitlement ratio states how many new securities a holder is due in a corporate action relative to the existing holding. It is written as two numbers, such as 1 for 4: one new share for every four held. It applies to bonus issues, stock dividends, splits, demergers, mergers paid in shares and rights issues, where it gives the number of subscription rights or new shares on offer per existing share.
Conventions differ. Most markets quote new securities first, but some quote the final holding instead: a 2 for 1 split in the United States means two shares after the event for each one before. Operations teams therefore record the ratio in a standard form before using it in the corporate action entitlement calculation. Where the ratio does not divide evenly into a holding, the result is a fractional entitlement. The broader family of rates is described under corporate action rate.