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Amortization - Definition and Overview |
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Amortization is distribution of a single lump-sum cash flow into many smaller cash flow installments for easier repayment. Unlike other repayment models, each repayment installment consists of both principal and interest. Amortization are chiefly used in loan repayments and sinking funds. The payments are usually of equal amounts. In the case of a loan, at the beginning of the loan, a greater amount of the payment is applied to interest compared to the latter portion of the loan.
Accounting
In accounting, Amortization also means the spreading of expenses over future time periods of intangible balance sheet items such as trademarks, copyrights, goodwill, or other deferred charges.
Real estate
In real estate, it is also used to refer to a loan with such repayment scheme.
Computer science
In computer science, an algorithm can be analyzed by its amortized running time or by an amortized consideration of how many actions it performs, on average. In particular, intentional randomness is sometimes introduced into searching and sorting algorithms, which can have the affect of making some algorithmic steps faster, and perhaps make some other steps slower, but which ultimately produce a better overall amortized performance.
See also
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