Accurate Financial Statements: Depreciation ensures that the value of assets is accurately reflected in financial statements, providing a true picture of the company's financial health. Tax Deductions: Depreciation can be used as a tax-deductible expense, reducing the taxable income of a business and thereby lowering its tax liability. Capital Budgeting: Understanding depreciation helps in making informed decisions regarding the replacement or upgrade of assets, aiding in effective capital budgeting. Investment Decisions: Accurate asset valuation through depreciation helps entrepreneurs make better investment decisions and assess the return on investment (ROI) of assets.