Segment margin is an amount of new profit (or net loss) generated by segment of the business. If the company business is differentiated, e.g. products are on different markets, different types of products are merchandised, it is convenient to compare different margin obtained by different segments of the company.
For example, segment margin on product A in country Z can be larger than for the same product in country Y. In other example, on the same markets product B can have larger segment margin than product C.
To calculate segment margin it is necessary to take away expenses from revenues, that are relatedo to the segment. In case of general costs, they should be divided between segments in order to get proper result.
- Chang, E. C., Luo, Y., & Ren, J. (2014). \Short-selling, margin-trading, and price efficiency: Evidence from the Chinese market. Journal of Banking & Finance, 48, 411-424.
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