The breakdown of revenue and profit by business line or region that companies must disclose, usually the most useful pages in the whole filing.
Segments are defined by how management actually runs the company, so they show where profit really comes from. A flat consolidated result often hides one segment collapsing while another compounds.
Segment operating profit is also the raw material for sum-of-the-parts, because each piece can be valued on the multiple its own industry earns.
Example: Northwind's $840M of revenue is $610M of tools at a 16% margin and $230M of Northwind Cloud software at a 9% margin but growing 34%. Consolidated growth of 7.7% hides a software business growing four times faster than the group.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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