amortization

Examples of amortization in the following topics:

• Loans and Loan Amortization

  • In these situations, an amortization schedule will be created.
  • Now if you add up all of the separate payments in an amortization schedule, you'll find the total exceeds the amount borrowed.
  • This is because amortization schedules must take into account the time value of money.
  • As a result of this calculation, amortization schedules charge interest over time as a percentage of the principal borrowed.
  • The calculation will incorporate the number of payment periods (n), the principal (P), the amortization payment (A) and the interest rate (r).

• Noncash Items

  • Noncash items, such as depreciation and amortization, will affect differences between the income statement and cash flow statement.
  • Common noncash items are related to the investing and financing of assets and liabilities, and depreciation and amortization.

• Annuities and Mortgages

  • Financial analysts use the present value formula to calculate mortgage payments, which is vital to building an amortization table.
  • We use the present value formula to build an amortization table.
  • We can use the mortgage loan information to build an amortization table.
  • We show an amortization table in Table 9.
  • All amortization tables have one feature.

• Uses of the Income Statement

  • The income statement also reflects the periodic decline in the value of fixed and intangible assets when depreciation and amortization expenses are reported.
  • The intangible asset goodwill is not subject to amortization but must be tested for impairment once a year; any reductions in value are reported as an impairment loss on the income statement.

• Other Expenses

  • Other expenses include SG&A, depreciation, amortization, R&D, finance costs, income tax expense, discontinued operations expenses.
  • When used in the context of a home purchase, amortization is the process by which loan principal decreases over the life of a loan.
  • An amortization table shows this ratio of principal and interest and demonstrates how a loan's principal amount decreases over time.

• Market Value vs. Book Value

  • For assets, the value is based on the original cost of the asset less any depreciation, amortization, or impairment costs made against the asset.
  • The book value is different from market value, as it can be higher or lower depending on the asset in question and the accounting practices that affect book value, such as depreciation, amortization and impairment.

• Understanding Future Stock Value

  • Numbers are usually reported as a GAAP EPS number (which means it is computed using mutually agreed upon accounting rules) and a Pro Forma EPS figure (income is adjusted to exclude any one time items as well as some non-cash items like amortization of goodwill or stock option expenses).
  • EBITDA stands for earnings before interest, taxes, depreciation and amortization.

• Elements of the Income Statement

  • Depreciation and amortization: charges with respect to fixed assets (depreciation) and intangible assets (amortization) that have been capitalized on the balance sheet for a specific accounting period.

• Defining the Income Statement

  • ., depreciation and amortization of various assets) and taxes.

• Sinking Funds

  • A less common provision is to call for periodic payments to a trustee, with the payments invested so that the accumulated sum can be used for retirement of the entire issue at maturity: instead of the debt amortizing over the life, the debt remains outstanding and a matching asset accrues.