How is revenue different from market cap and What is depreciation & amortization?



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Hi Binny,

I have 2 queries.

1.) If we say that a particular company is a 10 Billion dollar company, then are we referring to its revenue?

2.) What is depreciation & amortization and how are they different?

1 Answer(s)


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Good question Pradyut, 1) Typically when you say Google is a $250 billion company you are referring to its market cap and not revenue.

2) Depreciation and Amortization are accounting methods to match expenses to the time period in which they are used. So for example if your company buys a machine for Rs.1 crore, then you wont expense the entire amount this year since you might use the machine for 5 years - hence you will expenses Rs. 25 lakhs each year.

Depreciation is used for tangible items such as machinery, infrastructure etc,. Amortization is used for intangibles like intellectual property etc.