Pro Rata

Pro Rata refers to a Latin term meaning “in proportion.” It is used to describe the allocation or distribution of a quantity in a proportional manner based on a specific factor or criteria. This concept is often applied in finance, insurance, and business contexts to ensure that amounts are fairly distributed among Stakeholders based on their respective Shares or contributions.

For example, if a company distributes dividends to its Shareholder/">Shareholders on a pro rata basis, and a Shareholder/">Shareholder owns 10% of the total Shares, they will receive 10% of the total dividends declared.

Another case could be in an insurance premium refund situation. If an individual cancels their policy halfway through the year, they might receive a pro rata refund of the premium paid, which would be calculated based on the number of months the policy was active compared to the total policy duration.

In a rental scenario, if a tenant moves out after six months of a one-year Lease, they may be responsible for paying rent on a pro rata basis for the days they occupied the property, instead of the full month’s rent.