Depreciation & Amortization
When a company buys a factory or a fleet of trucks, it doesn't book the entire ₹100 cr cost against this quarter's profit. The cost is spread out across the asset's useful life - that yearly spread is depreciation (for tangible things like machinery) or amortization (for intangibles like software, goodwill).
A simple example
A small fleet of delivery trucks costs ₹100 cr. The company expects to use them for 10 years. Each year it books ₹10 cr depreciation. The truck sits on the balance sheet, but each year its accounting value drops by ₹10 cr.
Crucially: depreciation is not a cash outflow this quarter. The cash went out when the truck was bought, years ago. Depreciation is just spreading the past expense across future periods so the P&L matches investment to the years that benefit from it.
How it shows up
On the P&L:
- It's a single line between EBITDA and Operating Profit (EBIT)
- A bigger depreciation line usually means a bigger asset base - capital-heavy business