We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is a Segment Margin?

Jim B.
By
Updated: May 17, 2024
Views: 11,215
Share

The segment margin is a measure of the profitability of a specific aspect of a business and how it contributes to the profit margin of the business as a whole. By segmenting the different divisions of a business, management should be able to see which aspects are the most profitable and which may be struggling. A business may be segmented in many different ways, including by product line, location, and department. It is important to consider the costs associated with each segment of a business when using segment margin as a determining factor for how the business should be configured and whether or not one segment should be discontinued.

Businesses calculate their profit margin by taking all the revenue they have earned and subtracting the costs it takes to produce that revenue. While doing this can give a solid overview of a company, it might miss out on the individual reasons why its business might be succeeding or failing. For example, a company might have a poor profit margin that is being weighed down by one particularly weak aspect of the business. Calculating the segment margin will show how the individual components of a business contribute to the overall profit margin of the business as a whole.

To figure out each specific segment margin, each segment must be separated in terms of its costs and revenues. Once this is done, each segment should have its own specific profit margin which, when combined with the margins of other segments with certain fixed costs subtracted, should add up to the total profit margin. Each segment may also be measured in terms of the percentage of the overall profit margin it produces, giving managers a good idea of which segments are most valuable.

There may be many different ways in which segment margin might be analyzed. A retail business that has stores in many locations might consider each store a segment. If a company sells many different products, each product line can be studied as a segment of the business. In addition, if the revenues and costs can be accurately measured, the different departments of a company can be separated into segments.

It is important when analyzing the segment margin to consider the costs involved with each segments. Certain segments may have costs that are unique to their portion of their business, which can have a significant impact on their respective profit margins. There may also be costs that would be incurred by the business even if a particular segment is eliminated. These cost considerations are important if a business is considering streamlining its operations and eliminating certain segments.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Jim B.
By Jim B.
Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own successful blog. His passion led to a popular book series, which has gained the attention of fans worldwide. With a background in journalism, Beviglia brings his love for storytelling to his writing career where he engages readers with his unique insights.

Editors' Picks

Discussion Comments
Jim B.
Jim B.
Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own...
Learn more
Share
https://www.wisegeek.net/what-is-a-segment-margin.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.