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 But access to that facility depends on keeping net debt to less than 3.5 times basic operating earnings (before interest, taxes, depreciation and amortization). Geoffrey Smith, Fortune, "Life without sports—betting firms begin to tally up their coronavirus losses," 21 Mar. 2020 Adjusted earnings before interest, taxes, depreciation and amortization came in at $1.03 billion, down nearly 4 percent on a comparable basis. Georg Szalai, The Hollywood Reporter, "Coronavirus: Cineworld Says "Unlikely" Extended Closure of Cinemas Could Lead to Debt Breach," 12 Mar. 2020 In 2020, Square’s enterprise value has traded as high as 65 times its forward earnings before interest, taxes, depreciation and amortization. Telis Demos, WSJ, "Square Keeps Rolling Along," 27 Feb. 2020 Adjusted earnings before interest, taxes, depreciation and amortization totaled $141.2 million for the quarter, which was down 19% from the same period a year earlier. Nathan Bomey, USA TODAY, "Gannett posts lower revenue after New Media merger as digital subscriptions increase," 27 Feb. 2020 That deal, which values UMG at a record-setting multiple of 31 times its EBITDA (earnings before interest, taxes, depreciation and amortization), may have inspired Access to explore its options for WMG. Ed Christman, Billboard, "Why Warner Music Is Going Public Now & How No One Saw It Coming," 13 Feb. 2020 And at least on an EBITDA (earnings before interest, taxes, depreciation, and amortization) basis, the rides business is profitable. Timothy B. Lee, Ars Technica, "Uber’s plan to turn billion-dollar losses into profits isn’t crazy," 7 Feb. 2020 Its North America division reported record adjusted earnings before taxes, depreciation and amortization of over 2 billion euros. Washington Post, "Fiat Chrysler: prolonged virus trouble can hurt Europe plant," 6 Feb. 2020 Earnings before interest, taxes, depreciation and amortization for 2019 could fall to as little as £130 million ($171 million), Aston Martin said, down from £247 million ($326 million) in 2018. Charles Riley, CNN, "Aston Martin's troubles mount as profits slump by 45%," 7 Jan. 2020

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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Time Traveler for amortization

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The first known use of amortization was in 1851

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Last Updated

2 Apr 2020

Cite this Entry

“Amortization.” Dictionary, Merriam-Webster, Accessed 7 Apr. 2020.

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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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