Amortisation
Private Equity glossary · Advanced LBO Modeling Mechanics & Deal Structuring
Definition
Systematic repayment of debt principal over time; also, the gradual write-off of intangible assets.
Amortisation in plain English
Amortisation is just 'paying something off a little at a time.' In one sense it's chipping away at a loan: each payment shrinks the actual amount you borrowed (the 'principal'), the way monthly payments slowly kill off a car loan. In the accounting sense, it's the same idea applied to things you can't touch — like a patent or software a company bought — spreading their cost across the years they're useful instead of counting it all in one hit. Either way, the point is to recognize a big number gradually rather than all at once.
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