Scary Jargon For Project Managers, Part 1 Of An Occasional Series: Depreciation
[This is the first of an occasional series to help demystify some of the Scary Jargon Terms that get banded around an organisation, and which project managers may come across from time to time. Managing budgets and finances is an integral part of the project manager's role, but relatively few project managers will have received any formal financial training during their careers.
Consequently finance and financial terms can start to develop a mystique, and it's a brave person that will stick their hand up in the middle of a meeting and ask "excuse me, what's 'return on net assets' mean?" The idea of this series is to explain in language that I could understand what the jargon is all about.]
DEPRECIATION
As anyone who has bought, then subsequently sold a car will know, things aren’t necessarily worth what you paid for them. This can be because the item is less attractive to the market than it once was - think unpopular stocks - but more likely in a project situation, it’s because the item has deteriorated in some way. In the case of a car, think of wear and tear, the availability of newer models, trends in automotive fashion - all of these will combine to make the vehicle worth less now than when you paid for it. This concept is vital to understanding the value of a business, so read on to find out more.
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