am·​or·​ti·​za·​tion | \ ˌa-mər-tə-ˈzā-shən How to pronounce amortization (audio) 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

Zillow’s earnings statement listed a $56.5 million loss before interest, taxes, depreciation and amortization in its Homes segment, which includes Zillow Offers, in the second quarter. San Diego Union-Tribune, "San Diego: Zillow wants to buy your home," 9 Sep. 2019 In the quarter in which Foley spoke to CNBC, the company had an adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) loss of $4.2 million. Stephen Gandel, CBS News, "Peloton's CEO said the hot fitness company makes money — not even close," 29 Aug. 2019 The company also withdrew its previous guidance for a key measure of results, earnings before interest, taxes, depreciation and amortization, and investors sent the shares tumbling. Jonathan Roeder,, "Kraft Heinz gets warning: Cut debt or bonds will be rated junk," 23 Aug. 2019 Adjusted earnings before interest, taxes, depreciation and amortization, another profitability metric, increased 22 percent to a record $618 million. Georg Szalai, The Hollywood Reporter, "SiriusXM Adds 174,000 Satellite Radio, 64,000 Pandora Subs in Second Quarter," 30 July 2019 Big Machine reportedly had earnings (before interest, taxes, depreciation and amortization) of $40 million a year. Glenn Peoples, Billboard, "Did Scooter Braun Overpay for Big Machine Label Group? Not at All," 29 July 2019 By the end of that year, the company's net debt rose to about 5.5 times earnings before interest, taxes, depreciation and amortization, or EBITDA. Matt Egan, CNN, "The Budweiser beer empire was built on debt. Now it's racing to pay it off," 24 July 2019 The values take into account earnings before interest, taxes, depreciation and amortization. Scooby Axson,, "Dallas Cowboys Again Are World's Most Valuable Sports Team," 23 July 2019 Weak growth and thin profits have left Coty heavily indebted, with net borrowings worth 5.7 times earnings before interest, taxes, depreciation and amortization. Carol Ryan, WSJ, "Beauty Sector’s Uglier Stocks Deserve Second Look," 12 July 2019

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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Last Updated

2 Oct 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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