pro rata

adverb

pro ra·ta | \(ˌ)prō-ˈrā-tə,

-ˈrä-,

-ˈra-

Definition of pro rata

: proportionately according to an exactly calculable factor (such as share or liability)

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Otherwise, it will be distributed to many areas of government on a pro rata basis. — Julia O'donoghue, NOLA.com, "When will Louisiana have a state budget?," 29 May 2018 Pulselocker then tracks the number of plays, along with specific user information about cue points and loops, and delivers copyright holders a pro rata share of the subscription revenue. — Colin Stutz, Billboard, "Beatport Acquires DJ Streaming & Subscription Service Pulselocker to Boost Its Own Streaming Offering," 4 Apr. 2018 The transaction will include pro rata distribution of the new hotel company's stock to existing Wyndham Worldwide shareholders. — Paul Brinkmann, OrlandoSentinel.com, "Orlando area may get Wyndham Worldwide headquarters, 200 jobs," 10 Apr. 2018 Critics claim that by prioritizing Epidemic’s catalog on playlists like Ambient Chill, both major and indie artists (as well as other unknown artists) end up making less money per stream due to Spotify’s pro rata royalty payout model. — Cherie Hu, Billboard, "Those 'Fake Artists' on Spotify? Epidemic Sound CEO Oscar Höglund Says There Was 'No Special Deal'," 21 Nov. 2017 The company said in securities filings Tuesday the coal business, called Consol Mining Corp., will seek a listing on the New York Stock Exchange and distribute shares in Consol Mining on a pro rata basis to Consol Energy shareholders. — Ezequiel Minaya, WSJ, "Consol Energy Files to Spin Off Coal-Mining Business," 11 July 2017

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'pro rata.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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The first known use of pro rata was in 1575

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pro rata

adverb

Financial Definition of pro rata

What It Is

Pro rata refers to the proportional distribution of a sum across a number of units.

How It Works

A Latin term meaning "in proportion," pro rata is a method of allocating fractional amounts of something equally among all parts of a whole. Where interest rates are concerned, the practice of pro rata allows a periodic interest rate to be divided into smaller units (e.g. converting an annual rate into a monthly rate). This action is called "prorating" and may be used in reference to a bond being sold at discount; to a total dividend as divided among entitled shares of stock outstanding; or to an annual insurance premium adjusted for the remaining number of months in the year following the purchase of a policy.

To illustrate, suppose company XYZ declares a $1 million cash dividend. There are currently one million entitled shares outstanding in the market. Company XYZ, therefore, prorates the dividend to $1 per share based on the following math:

$1,000,000 dividend / 1,000,000 shares outstanding = $1 dividend per share outstanding

Why It Matters

The pro rata system provides a method for allocating single-unit amounts among several smaller units. This becomes particularly important for the sale and purchase of time-sensitive items such as interest-bearing securities and annual contracts or periodical subscriptions.

Source: Investing Answers

pro rata

adverb

pro ra·ta | \ˌprō-ˈrā-tə, -ˈrä-, -ˈra-