Quick Definition

Pro rata is a Latin term used to describe a proportionate allocation. It refers to the equitable distribution of something based on a certain rate, percentage, or amount.

Examples

• 1If a company pays dividends pro rata, shareholders receive dividends according to the number of shares they own.
• 2In a pro rata insurance policy, if a policyholder cancels their policy halfway through the coverage period, they are entitled to a refund of half of the premium paid.
• 3When a new investor joins a venture halfway through the year, they might receive a pro rata share of the profits based on the time they have been invested.
• 4In a bankruptcy scenario, creditors may receive pro rata payments based on the amount of their claims relative to the total amount of claims.

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