Enter the total segment revenue ($) and the total segment costs ($) into the Segment Margin Calculator. The calculator will evaluate and display the Segment Margin. 

Segment Margin Formula

The following formula is used to calculate the Segment Margin. 

SEM = (SR - SC) / SR * 100
  • Where SEM is the Segment Margin (%)
  • SR is the total segment revenue ($) 
  • SC is the total segment costs ($) 

How to Calculate Segment Margin?

The following example problems outline how to calculate Segment Margin.

Example Problem #1:

  1. First, determine the total segment revenue ($).
    • The total segment revenue ($) is given as: 150.
  2. Next, determine the total segment costs ($).
    • The total segment costs ($) is provided as: 70.
  3. Finally, calculate the Segment Margin using the equation above: 

SEM = (SR – SC) / SR * 100

The values given above are inserted into the equation below and the solution is calculated:

SEM = (150 – 70) / 150 * 100 = 53.33 (%)

FAQ

What is Segment Margin?

Segment Margin refers to the percentage that represents the portion of a segment’s revenue that remains after deducting the segment’s costs. It is a financial metric used to assess the profitability of a particular segment of a business, calculated as (Segment Revenue – Segment Costs) / Segment Revenue * 100.

Why is calculating Segment Margin important?

Calculating Segment Margin is crucial for businesses as it helps in understanding the profitability of different segments within the company. It aids in making informed decisions regarding where to allocate resources, identify areas for improvement, and strategize on how to enhance profitability.

Can Segment Margin be negative?

Yes, Segment Margin can be negative if the segment’s costs exceed its revenue. A negative Segment Margin indicates that the segment is not profitable and is losing money, which might require strategic adjustments or reconsideration of the segment’s viability within the business model.