Latin for “in proportion.” The term “pro rata” is used to denote proportional distributions or allocations. In a legal sense, pro rata may refer to a share to be received, an amount to be paid, or liability based on the fractional share of ownership, responsibility, or time. For example, a pro rata dividend is a dividend that is paid to each shareholder in proportion to the number of shares they own. If a company has 100 shares outstanding and it announces it will pay $1,000 in dividends to its shareholders, the pro rata amount that each share is worth is $10. If a shareholder owns five shares, they will receive $50 in dividends.
[Last updated in August of 2020 by the Wex Definitions Team]