Depreciation

What is depreciation? 

Depreciation is an accounting method that allocates the cost of a tangible asset over its useful life. It represents how much of an asset's value has been used up over time. In finance, depreciation can affect the valuation of a company, as it impacts the reported earnings.

Why is depreciation important to consider when trading?

Depreciation is important for traders as it can significantly affect a company's financial statements and, consequently, its stock price. Understanding how a company handles depreciation can provide insights into its long-term capital expenditures and profitability. For companies with large amounts of fixed assets, depreciation can be a key factor in assessing financial health and investment potential.