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BUSINESS GLOSSARY 2022 SERIES

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What is amortization?

Process of lowering the book value of a loan or an intangible asset across a set period.

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What can be amortized?

LOAN

PATENT

TRADE MARK

COPYRIGHTS

ONLY INTANGIBLE ASSETS WITH FINITE LIVES CAN BE AMORTIZED

ONLY INTANGIBLE ASSETS WITH FINITE LIVES CAN BE AMORTIZED

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When we take a bank loan the bank official gives us a table of repayment schedule i.e. amortization schedule. The table shows how & when the principal reduces to zero.

When we take a bank loan the bank official gives us a table of repayment schedule i.e. amortization schedule. The table shows how & when the principal reduces to zero.

Amortization of loan.

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Amortization of intangible assets.

To develop a product the R&D cost was Rs 10 Crore, & the patent period is 10 years. In such a scenario every year we will amortize Rs 1 Crore.

To develop a product the R&D cost was Rs 10 Crore, & the patent period is 10 years. In such a scenario every year we will amortize Rs 1 Crore.

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Formula

A: Payment Amount

P: Principal Amount

r: Rate of interest

n: No of Payment

(Initial cost - Salvage value) / useful years

(Initial cost - Salvage value) / useful years

For Intangible assets

For Intangible assets

For a loan

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WHAT IS AFTER SALES SERVICE?

WHAT IS An ASSET?

WHAT IS ANGEL INVESTMENT?

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