Segment Margin

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DEFINITION of 'Segment Margin'

The amount of profit or loss produced by one component of a business. With large companies, just knowing the gross margin for the entire business is not always enough. Knowing the segment margins for each division of the company that generates both expenses and revenues provides a more accurate picture of where the company is creating the most value and where its strengths and weaknesses lie.

INVESTOPEDIA EXPLAINS 'Segment Margin'

For example, an athletic shoe company might report its profit margin for the company as a whole. To provide greater detail, it could report segment margins - the profit margins for different components of the business, such as women's shoes, men's shoes, children's shoes and athletic accessories. If the company has multiple locations, it could also report the segment (geographic) margins for its Seattle stores, its Chicago stores and its Philadelphia stores, for example.

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