Pro Rata

Pro rata is a term that means each person gets their proportionate share of distributions. Pro rata is Latin for "in proportion." As an example, if three people own an investment that pays quarterly distributions, they are all paid based on the amount each has invested. If person A owns 20%, B owns 50%, and C owns 30%, and the next distribution is $1,000, A will receive $200, B $500, and C $300. Pro rata should not be confused with pro forma, which is used with financial statements that are based on assumptions.

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