Depreciation & Amortization (D&A)
Spreading the yearly decline in value of long-lived assets across years as an expense — a cost with no cash going out.
In plain terms
If you spend $1B on a machine used for 10 years, you do not book the whole cost in the year of purchase but spread it as $100M of expense each year. This is depreciation — recognizing as a yearly expense the amount the asset wears out.
Tangible assets like factories and machines are "depreciated," while intangible ones like patents and goodwill are "amortized," and together they are called D&A.
What it tells you
The key point is that it is "an expense with no cash actually going out." The money already went out when the asset was bought (CapEx); depreciation merely recognizes that on the books across several years.
So when computing operating cash flow or EBITDA, this non-cash expense is added back.
Formula
e.g. a $1B machine used for 10 years is booked as $100M of expense each year
What high or low means
Large depreciation often means a capital-intensive business with lots of plant and facilities (manufacturing, telecom, airlines).
Depreciation reduces profit but no cash goes out, so cash flow often comes out better than book profit.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Depreciation and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.