Amortization over time
The term amortization or amortization comes from the French and means as much as “amortir”. There are different meanings to consider here. The most common process is the amortization time, or amortization time. It describes how long it takes for an investment (financial expenditure, expenditure) to pay off. So that means it’s critical how much time it takes for the output to be an actual win. Initially it is a loss in the true sense of the word, which is finally compensated until the profit-making phase finally occurs. However, this does not always have to happen in this way. Individual investments are depreciated within the period or are already obsolete. It therefore needs a perfect overview of the respective businesses. Of course, it is also decided which objects or material assets are to be treated. The amount of time can vary and depends on several factors. These should therefore be carefully considered and best analysed with professional and competent help.

Amortization is manifold
The term amortization is used in the context of economics, energy technology and law. The origins of this name dates back to the Middle Ages and far into the 20th century. In history, the connection with the acquisition of the church’s property was used above all. The background is that the goods have been withdrawn from the secular economic cycle. The amortization limit controls the amount of the permissible sum of the individual values. The invested funds flow back from the returns of the respective investments. As soon as the volume of accumulated and returned funds is exceeded, it is a matter of an amortised investment. Repayment by instalments in accordance with a predetermined and determined schedule must also be taken into account.

The tax term
Amortization is the tax term used to describe the repayment of a bond or loan. This was preceded by a previously defined repayment schedule. One can therefore also speak of a debt repayment in connection with the bond. It is indispensable that the manufacturing costs or also the acquisition costs must be exceeded, so that one can speak of an amortization. The scheduled repayment of loans is also referred to as amortization. Lost cheques are declared powerless and are amortized. A change can also be made before the local court. Another point is the withdrawal of GmbH shares, which is also part of the definition of amortization.

Static amortization time
The amortization calculation is the period in which the invested capital can be obtained from the return flows of the capital. All the return flow components are decisive. These include depreciation, profits and imputed interest. The contrast to the static amortization time is the dynamic amortization time. This is the return to profitability of the investment project. In addition, interest is calculated at the level of the calculation flow. The investment projects are then evaluated with regard to their economic efficiency and the existing risks.

Calculation of the payback period
There are two basic methods for calculating the payback period. On the one hand, the average method exists and the second possibility is the cumulative method. The average method is used for constant annual financial statements. In individual exceptional cases, however, the The average method is used in the preparation of various financial statements. The cumulative method, on the other hand, is only suitable for different financial statements.
Calculation of the amortisation period using the average method:
All annual financial statements must first be added together. Thereafter, the division is based on the useful life to determine the average net income for the year. In the case of constant surpluses, this partial calculation can of course be omitted.

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