Depreciation, cash flow, and the reality of many capital assets
Depreciation is a noncash expense. In the tractor example above, the only time the farmer actually reduced his cash on hand was when he purchased the tractor. For the next 10 years, though, the tractor spent thousands of hours around the farm and in the fields, rain or shine. The farm needs a working tractor to operate; every day the tractor fires up and gets to work is one day closer to the time it will need to be replaced. When that time comes, that means spending cash for a new tractor.
So while the tractor's depreciation expense is a noncash expense for all the years it is in use on the farm, the tractor was actually losing real value that will one day require a cash expense. The same is true for many other assets -- machines wear down and must be replaced, buildings need new roofs from time to time, vehicles only run for so long.