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

SearchCompliance
  • compliance risk

    Compliance risk is an organization's potential exposure to legal penalties, financial forfeiture and material loss, resulting ...

  • information governance

    Information governance is a holistic approach to managing corporate information by implementing processes, roles, controls and ...

  • enterprise document management (EDM)

    Enterprise document management (EDM) is a strategy for overseeing an organization's paper and electronic documents so they can be...

SearchSecurity
  • hacker

    A hacker is an individual who uses computer, networking or other skills to overcome a technical problem.

  • Extensible Authentication Protocol (EAP)

    The Extensible Authentication Protocol (EAP) is a protocol for wireless networks that expands the authentication methods used by ...

  • session key

    A session key is an encryption and decryption key that is randomly generated to ensure the security of a communications session ...

SearchHealthIT
SearchDisasterRecovery
  • risk mitigation

    Risk mitigation is a strategy to prepare for and lessen the effects of threats faced by a business.

  • call tree

    A call tree is a layered hierarchical communication model that is used to notify specific individuals of an event and coordinate ...

  • Disaster Recovery as a Service (DRaaS)

    Disaster recovery as a service (DRaaS) is the replication and hosting of physical or virtual servers by a third party to provide ...

SearchStorage
  • cloud storage

    Cloud storage is a service model in which data is transmitted and stored on remote storage systems, where it is maintained, ...

  • cloud testing

    Cloud testing is the process of using the cloud computing resources of a third-party service provider to test software ...

  • storage virtualization

    Storage virtualization is the pooling of physical storage from multiple storage devices into what appears to be a single storage ...

Close