Depreciation & Amortization (D&A)

Depreciation and amortization spread the cost of a long-lived asset across the years it gets used, instead of expensing it all at purchase. Depreciation applies to physical assets (machines, buildings, vehicles); amortization applies to intangible ones (acquired patents, customer lists, software).

D&A is a non-cash charge — the cash left when the asset was bought — which is why it gets added back on the cash flow statement and stripped out of EBITDA. Non-cash does not mean not real: the charge represents genuine consumption of an asset that will eventually need replacing with actual dollars. Comparing D&A to capex shows whether the company is replacing what it uses up.

Acquisition-heavy companies carry large amortization charges from purchased intangibles, which depress GAAP earnings without touching cash. Most adjusted-earnings reconciliations start right there.