Pro-rata is a Latin term that means 'in proportion'. This is used to indicate the relative value of one part to another. This does not necessarily mean that every part is equal. It simply means that all parts have weighted values relative to their proportional sizes.
How does it look in real life? If you are paid a pro-rata wage, it is calculated using the amount you would earn full-time. Part-time wages are paid proportionally to full-time wages. You can also select what your allowance is based on with the help of a pro-rata calculator.
What does pro-rata serve?
A pro-rata calculator is used to calculate hourly or salary wages. These calculations can also be used to calculate financial situations like dividends, interest, and insurance premiums.
Dividends are paid according to the shareholders' shareholding. Imagine Company ABC has given 100 shares to four shareholders. Each share yields PS3 dividends, for a total of PS300. The total value of the shares cannot exceed PS300, regardless of how they are distributed.
Shareholder 1 has 50 shares and receives PS150.
Shareholder 2 owns 30 shares and is eligible for PS90.
Shareholder 3 owns 10 shares and is eligible for PS30.
Shareholder 4 owns 10 shares and is eligible for PS30.
Dividends are paid proportionally to PS300 or pro-rata. A simple formula to calculate pro-rata dividends is:
Per Share Dividend = Total Dividends/Total Number of Outstanding Shares
The per-share dividend amount can be multiplied by the total shares owned by each shareholder.
The bottom line
Pro-rata can be used in many situations, including finance and payroll.