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What Does the Legal Term Pro Rata Mean

Under U.S. federal regulations, a government employee has the right that “if an employee`s service is interrupted by a period of income not left, the leave is earned on a pro rata basis for each partial pay period that occurs in continuity of employment.” PROPORTION. Depending on the tariff, share or allowance. A creditor of an insolvent estate must be paid pro rata with creditors of the same class. (proh rat-ah or proh ray-tah) adj. from Latin for “in action”, referring to a share to be received or an amount to be paid on the basis of a fraction of the property, liability or time spent. Examples: An heir who receives a quarter of an estate may be responsible for a quarter of the inheritance tax on a pro rata basis. The buyer of a rental property pays his proportional share of the property tax for the part of the year in which he holds the property. If liability for a toxic offense or defective product affects many manufacturers, liability under tort law is allocated on a pro rata basis. In a bankruptcy case, where the debtor is insolvent, creditors generally agree to accept a proportionate share of what is owed to them. If the debtor has remaining funds, the money is divided proportionally among the creditors, depending on the amount of each debt. A pro-rata clause of an auto insurance policy provides that if an insured person has other insurance policies that cover the same type of risk, the company issuing the policy with the pro-rated clause is only liable for part of the loss represented by the ratio between the limit of its policy and the total limits of all available insurance. If a student resigns, colleges may reimburse tuition on a pro rata basis.

According to UK labour law, “the regulations state that, where appropriate, the principle of pro rata must be applied to any comparison. To give. Holiday. If something is spent in proportion to people, it means that an amount is allocated to a person based on their share of the whole. Although a pro-rata calculation can be used to determine the corresponding parts of a particular set, it is often used in corporate finance. Suppose there are only four shareholders who hold 50, 25, 15 and 10 shares respectively. The amount due to each shareholder is his or her pro rata share. This is calculated by dividing each person`s ownership by the total number of shares and then multiplying the resulting fraction by the total amount of the dividend payment. Each of several partners “is responsible only on his own share or on his own share, they should be related proportionately.

An example. are in the responsibility of the partners; Everyone is responsible. only proportionally to each other. Prorata is an adverb or adjective that means equal or proportional parts. [1] The term is used in many legal and economic contexts. Proportional spelling with hyphen for the adjective form is common, as recommended by some English style guides for adjectives. In North American English, this term was spoken colloquially or partially colloquially. Suppose an auto insurance policy, which typically covers an entire year, has a premium of $1,000.

If the insured only needs the policy for 270 days, the company must reduce the premium accordingly. The prorated premium due for this period is ($1,000 / 365) x 270 = $739.73. In the case of bonds, the payment of accrued interest is calculated on a pro rata basis. Accrued interest is the total interest that has accrued on a bond since the last coupon payment. If the bondholder sells the bond before the next coupon date, he is still entitled to the interest accrued until the bond is sold. It is the buyer of the bond, not the issuer, who is responsible for paying the bond to the seller of accrued interest added to the market price. The calculation of the return premium for a cancelled insurance policy is often done using a pro-rated cancellation method. First, a performance premium factor is calculated by dividing the number of days remaining in the insurance term by the total number of days in the policy.

This factor is then multiplied by the policy premium to receive the performance bonus. Traditionally, this was done manually with a paper wheel calculator. Today, this is usually done with an online bike calculator. [23] Another common practice is to determine the amount due for a partial term of an insurance policy. Most insurance policies are based on a full 12-month year, so if a policy is needed for a shorter term, the insurance company must calculate the annual premium on a pro rata basis to determine what is due. To do this, divide the total premium by the number of days of a standard duration and multiply it by the number of days covered by the abbreviated policy. Prorata usually means that each party or person receives its fair share of the whole. Prorated calculations can be used in many areas, including the determination of dividend payments, which are cash payments by corporations paid to shareholders. The proportional part is also used to determine the amount of the premium due for an insurance policy that covers only a partial term. The allocation of the corresponding part of an annual interest rate to a shorter period may also be made on a pro rata basis.

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