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Pro Rata

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Pro rata means in proportion to. Thus pro rata is used when costs, proceeds, profits, etc. are divided among participants according to ownership or some other factor. For example, suppose daily usage charges for periods of less than one day are applied pro rata based on hours. If the daily charge is $24, the pro rata cost for three hours is $3. Or suppose a company makes a pro rata cash distribution of $10 per share. If a shareholder has 200,000 shares, he or she receives $2,000,000. Pro rata is used in many financial and legal contexts: insurance policies may have pro rata clauses based on the assessed value of one property to the assessed value of all properties; legal settlements may be distributed pro rata based on the proportion of an individual claim to all claims; and a retiree may received pro rata payments based on each year of service worked.



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