Finance Numericals

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 interest rate is high if the loan period is more. ·          If the interest rate is high and in the rate falls in that case borrower has to pay more interest. Amo