A Durable Competitive Advantage Company tends to have a lower depreciation cost than a company that is in a highly competitive market.
The simple rule for a D.C.A business is, If looking at an expense that eats into the company gross profit,
Warren Buffett Said “Less means More”
Depreciation is the true cost of using your asset to do business.
All assets have a useful life. Assets eventually must be replaced or up dated. This cost can only come from the cash flow of the business.
Depreciation although a calculated number must always be taken seriously as a cost to operate the business.
Depreciation is calculated using the cost of the asset divided by the assets useful life spread over the period of life. A cost allocated against the income created for each year.
- Rent being the cost of using someone else’s asset.
- Interest being the cost of using some else’s money
- Depreciation being the true cost of using your asset.
The True Cost Of Using Your Asset
