Amortization: It is a way of paying long term debt on intangible assets at regular interval and in fixed amounts. Example: A company spends Rs. 5, 00,000 for purchasing trademark for a product and they write off that expense by equally distributing for 5 years means Rs.1, 00,000 write off each year and in monthly (1, 00,000/12) Rs. 8333 that is known as amortization. Advantages of Amortization : · A loan amount is divided into equal monthly payments which makes it easy for borrower to pay in time. · It is good for borrower who does not have enough money to purchase such assets like machinery , furniture etc. · It also give tax- benefits to borrower. Disadvantages of Amortization: · The ...
This blog is totally for education purpose which helps to solve finance related numerical like time value of money, annuity ,perpetuity, technique of capital budgeting, cost of capital, working capital management and hire purchase etc.