How Amortization Works

Amortization is an accounting technique used to periodically lower the book value of a loan or intangible asset over a set period of time. The term "amortization" can refer to two situations..

Amortization refers to the reduction of a debt over time by paying the same amount each period, usually monthly. With amortization, the payment amount consists of both principal repayment and interest on the debt. Principal is the loan balance that is still outstanding. As more principal is repaid, less interest is due on the principal balance.

As with many other companies american water works company, Inc. (NYSE. depreciation, and amortization (EBITDA), while the.