How to calculate segment margin?
Understand the Problem
The question is asking for the method to calculate segment margin, which involves understanding specific revenue and cost elements associated with a segment of a business. This includes identifying revenues related to the segment and subtracting the direct costs associated with it.
Answer
Segment Margin = Segment Revenue - Segment Expenses
The final answer is Segment Margin = Segment Revenue - Segment Expenses
Answer for screen readers
The final answer is Segment Margin = Segment Revenue - Segment Expenses
More Information
Segment margin provides insight into the profitability of a specific business line or segment by isolating the revenues and costs directly associated with it. This helps in making informed management decisions.
Tips
A common mistake is including non-segment costs or revenues. Ensure to only consider expenses and incomes that can be directly attributed to the segment.
Sources
- Segment Margin - Definition, Formula, How to Calculate? - wallstreetmojo.com
- Segment Margin - The Strategic CFO® - strategiccfo.com
- Segment Margin Calculator - calculator.academy
