Browse Definitions :
Definition

amortization

Amortization is a financial practice that allows buyers to pay for something over an extended schedule rather than all at once. Mortgages and car loans, for example, are commonly paid through an amortization schedule.

An amortization schedule typically involves regular payments over a particular time period. Essentially an extension of credit, amortization allows people and businesses to make purchases that they don't have funds available to pay in full. Because interest is factored into payments, the total cost of an amortized purchase is significantly higher than the original price. 

In business, amortization is usually separated into amortization of assets and amortization of loans because those categories are handled differently. Amortization is often the most cost-effective method of allocating funds for a given expense, even if the funds are available for immediate payment, because there may be a more profitable use of those funds. Similarly, a business may take out a loan rather than paying for something outright because there is a financial advantage, such as optimizing a tax deduction over an extended period.

In financial reporting and corporate governance, amortization is the A in EBITDA (earnings before interest, taxation, depreciation and amortization).

Amortization originates from the Latin admortire meaning to kill.

This was last updated in February 2018

Continue Reading About amortization

SearchNetworking
SearchSecurity
  • man in the browser (MitB)

    Man in the browser (MitB) is a security attack where the perpetrator installs a Trojan horse on the victim's computer that is ...

  • Patch Tuesday

    Patch Tuesday is the unofficial name of Microsoft's monthly scheduled release of security fixes for the Windows operating system ...

  • parameter tampering

    Parameter tampering is a type of web-based cyber attack in which certain parameters in a URL are changed without a user's ...

SearchCIO
  • chief procurement officer (CPO)

    The chief procurement officer, or CPO, leads an organization's procurement department and oversees the acquisitions of goods and ...

  • Lean Six Sigma

    Lean Six Sigma is a data-driven approach to improving efficiency, customer satisfaction and profits.

  • change management

    Change management is a systematic approach to dealing with the transition or transformation of an organization's goals, processes...

SearchHRSoftware
SearchCustomerExperience
  • clickstream data (clickstream analytics)

    Clickstream data and clickstream analytics are the processes involved in collecting, analyzing and reporting aggregate data about...

  • neuromarketing

    Neuromarketing is the study of how people's brains respond to advertising and other brand-related messages by scientifically ...

  • contextual marketing

    Contextual marketing is an online marketing strategy model in which people are served with targeted advertising based on their ...

Close