what is pro rata 
pro rata is a latin term used to describe a proportionate allocation it translates to in proportion it s a process in which an allocated asset will be distributed in equal portions an amount is assigned to one person according to their share of the whole if something is distributed to several people on a pro rata basis a pro rata calculation can be used to determine the appropriate portions of any given whole but it s often used in business finance investopedia matthew collinsunderstanding pro ratapro rata typically means that each party or person receives their fair share in proportion to the whole pro rata calculations can be used in many areas including determining dividend payments these are cash payments by corporations made to shareholders pro rata in the insurance industry is used to determine the amount of premium due for a policy that only covers a partial term allocating the appropriate portion of an annual interest rate to a shorter time frame can also be done via pro rata pro rata is also used to determine how much of a distribution from a qualified retirement account such as an ira sep or 401 k is taxable when the account contains before and after tax dollars 1 an account holder might have a 401 k funded with 20 pre tax dollars and 80 post tax dollars withdrawals will consist of 20 taxable and 80 non taxable money as a result 