amortization

Vocabulary Word

Definition

'Amortization' means gradually reducing a debt by consistently making small payments over a period of time. It's like completing a months-long puzzle by adding a piece every day.

Examples in Different Contexts

In sustainable initiatives, 'amortization' could mean recovering the costs of green technologies over time. An environmental consultant might note, 'The solar panels' cost will be amortized over their 25-year operational life.'

Practice Scenarios

Business

Scenario:

We need to update our financial accounting to reflect the cost of software development for the next five years.

Response:

You're right. We should adopt an amortization strategy to spread the cost evenly over the next five years.

Real-Estate

Scenario:

Keep in mind, you need to calculate both the principal and interest when understanding your monthly payments.

Response:

Absolutely, getting a clear picture of an amortization table will help me make an informed decision.