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.

  Know More

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:

    How do you calculate NPV?

    A:

    To calculate net present value of an investment, divide the guaranteed return by 1 plus the interest rate that a different investment would bring in, and subtract the initial investment from the result. Consider a positive answer a sign that the investment is comparatively sound.

    Full Answer >
    Filed Under:
  • Q:

    How do you calculate revenue?

    A:

    Business owners calculate gross revenue by multiplying the quantity of goods or services sold during a specific period by the sales price for each item, as explained by the Udemy website. Basically, revenue is the amount of money a company generates from its primary business activities.

    Full Answer >
    Filed Under:
  • Q:

    How do you calculate interest?

    A:

    To calculate interest, multiply the periodic interest rate by the principle amount. For example, if you borrowed $1000 with an interest rate of 10 percent, in a year your interest paid is $100.

    Full Answer >
    Filed Under:
  • Q:

    How do I calculate overhead recovery?

    A:

    To calculate overhead recovery, small manufacturing concerns use the standard costing approach in which indirect costs are divided and incorporated into the price of every unit, explains Jackie Lohrey of the Houston Chronicle. In contrast, service-related businesses typically rely on an activity-based costing approach in which costs are directly assigned to the activity that generates them.

    Full Answer >
    Filed Under:

Explore