Definition of pro rata
: proportionately according to an exactly calculable factor (such as share or liability)
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Recent Examples of pro rata from the Web
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The transaction will include pro rata distribution of the new hotel company's stock to existing Wyndham Worldwide shareholders.
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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.
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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.
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.
Origin and Etymology of pro rata
Latin
Other Economics Terms
Financial Definition of PRO RATA
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
Law Dictionary
legal Definition of pro rata
: proportionately according to an exactly calculable factor (as share or liability)
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pro rata
adjectiveOrigin and Etymology of pro rata
Latin
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