Depreciation is the loss of value suffered by a certain asset as a result of the passage of time or an adjustment in supply and demand for it. The depreciation It is a circumstance that can be negative for some market agents and positive for others, but the truth is that it must be understood in any scenario to foresee how and when it will happen; Certainly, an absolute level of foresight is impossible in many circumstances, but taking action based on common sense can be of great importance in preserving the capital that one owns.
Depreciation of property
All physical goods suffer some degree of depreciation as time goes by. In effect, the use, wear and tear and improvements that exist in the market make tangible goods gradually lose the price at which they can be sold or bought. In the case of vehicles, this loss of value is usually more pronounced, followed by goods and tools, machinery and lastly buildings. Amortization is regularly calculated on the balance sheets of a company and is now considered to establish its equity. In these cases, the depreciation it depends on the fluctuation of the market and the use of the good.
When referring to financial assets, the depreciation it is also caused by the game between supply and demand, although it is important to establish that these forces depend on the conditions of said assets. Indeed, the shares of a company that has reported an increase in its profits usually have an increase in demand, while when the opposite happens, the supply increases. As for debt securities, their price will depend on the time and risk of the same; In this way, if it is evaluated that it will be difficult to collect these securities, its price will have to fall, while if it is considered that the payment of the debt is safe, the price will tend to rise.
One of the main positive aspects of the knowledge of finances is the fact of being able to learn to defend the patrimony that one owns. In this sense, evaluate the possibilities of depreciation The fact that our capital may suffer from the consequences of market fluctuations or the mere passage of time is enormously important and should guide us to increase our knowledge in a significant way in the matter.
