Proration

What Does Proration Mean?

Proration is the act of distributing or charging money proportionate to some other element.

Insuranceopedia Explains Proration

Proration is often associated with a mode of payment calculated because something else is in play that stops someone from making a full payment. One typical example is that of a person who rents an apartment on the 15th day of the month. By the 30th, they are only expected to pay half of a month's rent because of the length of their tenancy.

Another case of proration is the corporate decision to pay shareholders with a combination of shares and cash because the corporation cannot afford to pay them in full using either one of those options alone.