Posted in Finance, Accounting and Economics Terms, Total Reads: 289
Definition: Cashless Conversion
Conversion of ownership of any kind of asset or from one kind of asset to another without involving any kind of Cash flow is called as Cashless Conversion. Generally, It is observed in transactions that are executed automatically based on a pre decided contract or agreement.
It is a direct conversion of a type of ownership to another one of an asset without the person investing having to put out initial money or cash.
ESOPs (Employee Stock Options) given to an employee by the company that can be traded after 2 years of them getting issued. At the end of two years, the ESOPs will automatically get converted to ordinary shares. There will be no cash inflow or outflow in this transaction. Hence this is a cashless transaction.