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The phrase "pro rata" is frequently used in finance to refer to the equitable distribution of resources, such as shares or dividends, among several parties. Pro rata, which roughly translates to "in proportion," is frequently employed to guarantee that each participant receives a just share based on their contribution or right.
For instance, existing shareholders may be entitled to purchase extra shares pro rata based on the number of shares they now own if a company issues new shares to raise capital. This indicates that each shareholder has the right to acquire additional shares in a proportional manner to their current shareholding.
Similarly to this, when a corporation declares a dividend, shareholders may be entitled to a pro-rata part of the dividend depending on how many shares they own. This makes sure that every shareholder receives a fair part of the company's profits in proportion to their investment.
