am·​or·​ti·​za·​tion | \ ˌa-mər-tə-ˈzā-shən also ə-ˌmȯr- \

Definition of amortization

1 : the act or process of amortizing
2 : the result of amortizing

Examples of amortization in a Sentence

Recent Examples on the Web

The index, which was created in 2012, focuses on financial performance during the first two months of each quarter and measures earnings before interest, tax, depreciation and amortization. Nina Trentmann, WSJ, "Small Private Firms See Surge in Fourth-Quarter Earnings," 11 Jan. 2019 The San Francisco firm typically backs businesses with revenue of $25 million to $250 million or more and earnings before interest, taxes, depreciation and amortization of $5 million to $25 million or more. WSJ, "Svoboda Capital Sells Infinite Packaging to Main Post’s Fortis Solutions," 2 Jan. 2019 The two investments will push Altria’s net debt levels to 2.6 times projected earnings before interest, taxes, depreciation and amortization. Carol Ryan, WSJ, "Marlboro Maker Is Paying a Desperate Price for Juul," 20 Dec. 2018 On Wednesday, Altice reported adjusted earnings before interest, tax, depreciation and amortization of EUR1.30 billion and revenue of EUR3.44 billion. WSJ, "European Equities Market Talk Roundup," 22 Nov. 2018 Zillow reported earnings late Monday and lowered its guidance for full-year sales and Ebitda, or earnings before interest, taxes, depreciation and amortization. Patrick Clark, The Seattle Times, "Zillow plunges after revenue falls short and analysts downgrade stock," 7 Aug. 2018 The contractual revenue is before interest, tax, depreciation, and amortization, however, so actual numbers may be higher or lower. Megan Geuss, Ars Technica, "After working with Tesla’s Australia battery, wind company wants more batteries," 25 Sep. 2018 Adjusted earnings before interest, taxes, depreciation and amortization this year will be 570 million euros ($660 million) to 600 million euros, compared with a previous forecast of 640 million euros. Fortune, "Trump's Trade War Claims Another Victim," 28 June 2018 During his tenure, earnings before interest, taxes, depreciation and amortization hit $1 billion. Bloomberg,, "Toys R Us ex-CEO is trying to reboot the company, sources say," 25 June 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'amortization.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of amortization

1851, in the meaning defined at sense 1

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6 Feb 2019

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The first known use of amortization was in 1851

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Financial Definition of amortization

What It Is

Amortization is an accounting term that refers to the process of allocating the cost of an intangible asset over a period of time. It also refers to the repayment of loan principal over time.

How It Works

Let's assume Company XYZ owns the patent on a piece of technology, and that patent lasts 15 years. If the company spent $15 million to develop the technology, then it would record $1 million each year for 15 years as amortization expense on its income statement.

Alternatively, let's assume Company XYZ has a $10 million loan outstanding. If Company XYZ repays $500,000 of that principal every year, we would say that $500,000 of the loan has amortized each year.

Why It Matters

The length of time over which various intangible assets are amortized vary widely, from a few years to as many as 40 years.  As a general rule, an asset should be amortized over its estimated useful life, or the maturity or loan period in the case of a bond or a loan.  If an intangible asset has an indefinite life, such as goodwill, it cannot be amortized.

It is important to note that the term amortization refers to intangible assets; the term depreciation refers to tangible assets, and the term depletion refers to natural resources.

Source: Investing Answers

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to deny responsibility for

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