Segment margins are the total net loss and profit produced by a specific segment in a business. Tracking segment margins is useful for identifying which areas of business are performing well and which fall below expectation. Segments of business include product lines, specific store locations and subsidiaries.
Segment margins help determine which areas of business require additional funds and which areas are suitable for additional investments. These margins place emphasis on segments within the business that generate the most revenue and produce the most expenses. Segment margins paint an accurate picture of which segment is the most valuable and which is the most costly. These margins identify specific strengths and weaknesses that help businesses make profitable adjustments.