Q:

How do you calculate pro rata shares?

A:

Quick Answer

Calculating a pro rata share simply means dividing a whole into parts according to ownership or use, according to the Legal Information Institute. For example, if Ms. A and Mr. S own 60 and 40 percent of a company, respectively, and that company is sold for $1 million, then Ms. A should receive $600,000 and Mr. S should receive $400,000.

Continue Reading

Full Answer

Wikipedia explains that pro rata calculation is used in a variety of industries and settings. For instance, it is regularly used to determine the amount of insurance premium due back to the insured if a policy is cancelled before the full year term expires. For example, a $1,825 premium policy that begins on June 1st and is cancelled on October 30 should return a portion of the premium to the insured for the remaining days of the year. To calculate this amount, divide the number of days left of the original policy term by 365. There are 152 days between Jan. 1st and May 30th, leaving 213 day from the original term. Two hundred and thirteen divided by 365 yields a pro rata factor of 0.584. To find the amount of the return premium due, simply multiply the pro rata factor by the original $1,825 premium to get $1,065.

In a more common scenario, if four roommates must pay a $500 electric bill, each person's pro rata share is $125.

Learn more about Financial Calculations

Related Questions

  • Q:

    What is the definition of the legal term per stirpes?

    A:

    Per stirpes is a legal term for the system of determining descendants of a deceased person to distribute an estate, wherein shares are defined by generational class, states the Legal Information Institute. It is used to determine the proportionate shares descendants receive from an estate that has no will.

    Full Answer >
    Filed Under:
  • Q:

    What does Berkshire Hathaway's stock split mean to investors?

    A:

    The Berkshire Hathaway stock split redistributed shares of ownership and decreased the value of each share, as noted by CNBC. This created an opportunity for more investors to purchase shares of Berkshire Hathaway stock.

    Full Answer >
    Filed Under:
  • Q:

    What is a market cap?

    A:

    Market cap, which is short for market capitalization, is the value of a public corporation's outstanding shares of stock. According to the U.S. Securities and Exchange Commission, it is equal to the price of a single share of a corporation's stock at a particular point in time multiplied by the number of shares that are outstanding.

    Full Answer >
    Filed Under:
  • Q:

    What information is available in a U.S. wealth distribution graph?

    A:

    U.S. wealth distribution graphs show wealth held by percentage and by racial, ethnic, gender or age group segments of the population, and the impacts of those different shares, according to Business Insider. Wealth distribution graphs show causes of wealth differences between and among those groups, notes the Urban Institute.

    Full Answer >
    Filed Under:

Explore