Q:

How do you calculate pro rata shares?

A:

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.

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.


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