amortization

USAGE SUMMARY

"amortization" is a correct and usable word in written English.
It is a financial term for reducing the cost of a loan by making periodic payments. For example, "The company took out a loan and used amortization to pay it back over time."

✓ Grammatically correct

News & Media

Encyclopedias

Formal & Business

Human-verified examples from authoritative sources

Exact Expressions

60 human-written examples

Then in the 1930s strong traditions emerged supporting amortization of mortgage loans; by 1934-1939 69% of commercial bank mortgage loans were amortized.

The Economist

Mr Edmonds estimates that three or four times earnings before interest, taxes, depreciation and amortization, or EBITDA, is typical.

The Economist

Usually the term loan is retired by systematic repayments (amortization payments) over its life.

Encyclopedia Britannica

The advantage of accelerated amortization for tax purposes lies in the deferment of taxes rather than in their reduction.

Encyclopedia Britannica

The first Ottoman foreign loan was in 1854; by 1875 the nominal public debt was £200 million, with annual interest and amortization payments of £12 million, more than half of the national revenue.

Encyclopedia Britannica

In the second sense, the amortization of an asset, such as a building, a machine, or a mine, over its estimated life has the effect of reducing its balance-sheet valuation and charging its cost into the expenses of operation.

Encyclopedia Britannica

Accelerated amortization was permitted in the United States during World War II and extended after the war to encourage business to expand productive facilities that would serve the national defense.

Encyclopedia Britannica

When amortization is accelerated, the drain of income taxes is reduced for the business during the years immediately after the purchase, thus releasing more funds for the repayment of any obligations incurred in financing the property.

Encyclopedia Britannica

Some assets, such as property that is abandoned or lost in a catastrophe, may continue to be carried among the firm's assets until their extinction is achieved by gradual amortization.

Encyclopedia Britannica

In the 1950s, accelerated amortization encouraged the expansion of export and new product industries and stimulated modernization in Canada, western European nations, and Japan.

Encyclopedia Britannica

The combined entity will have net revenue of £2.1 billion and earnings before interest, taxes, depreciation and amortization of £392 million.

Independent

Expert writing Tips

Best practice

When discussing financial statements, clarify whether you're referring to loan amortization or the amortization of intangible assets to avoid ambiguity. For example, "The company's financial health improved due to careful loan amortization."

Common error

Avoid using "amortization" interchangeably with "depreciation". "Amortization" refers to intangible assets or loan repayment, while "depreciation" applies to tangible assets like machinery and equipment.

Linguistic Context

The primary grammatical function of "amortization" is as a noun. It typically refers to the systematic reduction of debt or the allocation of the cost of an intangible asset over its useful life. Ludwig AI confirms its correct usage.

Expression frequency: Very common

Frequent in

News & Media

48%

Encyclopedias

14%

Formal & Business

14%

Less common in

Science

14%

Academic

0%

Wiki

0%

Ludwig's WRAP-UP

In summary, "amortization" is a noun referring to the process of systematically reducing debt or allocating the cost of an intangible asset over time. As Ludwig AI states, it's a correct and usable word in written English, predominantly used in finance and accounting. Examples from Ludwig show it's common in News & Media, Encyclopedias, and Formal & Business contexts. While related to "depreciation", it's crucial not to confuse the two. Use "amortization" to describe the structured repayment of debt or the expensing of intangible assets.

More alternative expressions

Phrases that express similar concepts, ordered by semantic similarity:

loan amortization

Specifically refers to the amortization of a loan, making it more specific than the original phrase.

debt amortization

Directly refers to the amortization of debt, emphasizing the financial aspect.

gradual debt repayment

Emphasizes the gradual nature of paying off debt, a key aspect of amortization.

systematic debt reduction

Highlights the structured nature of reducing debt over time, similar to amortization.

reducing loan principal

Specifies the effect of amortization, which is to lower the loan principal amount.

debt repayment schedule

Focuses on the timeline for paying off a debt, rather than the process itself.

writing off intangible assets

Focuses on the accounting aspect of amortization related to intangible assets.

systematic cost allocation

Highlights the cost distribution aspect of amortization especially for intangible assets.

asset depreciation

Refers to the decrease in value of tangible assets, similar to amortization for intangibles.

periodic payments

Highlights the regular payments made as part of the amortization process.

FAQs

How is "amortization" used in accounting?

In accounting, "amortization" refers to the process of spreading the cost of an intangible asset over its useful life. This is similar to how depreciation works for physical assets.

What's the difference between "amortization" and depreciation?

"Amortization" applies to intangible assets or the reduction of debt, while depreciation applies to tangible assets. For example, a patent undergoes "amortization", while a vehicle undergoes depreciation.

How does "amortization" work with mortgage payments?

"Amortization" in mortgage payments refers to the repayment of the loan principal over time through regular payments. Each payment includes both principal and interest, gradually reducing the outstanding loan balance.

What are the benefits of accelerated "amortization" for tax purposes?

Accelerated "amortization" can lead to a deferral of taxes. This allows businesses to reduce their tax burden in the early years of an asset's life, freeing up capital for reinvestment.