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The Definition of an Operating Segment - Essay Example

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The operating segments of an enterprise are the different profits centers that generate the company money. For instance if a company has various divisions dedicated to the production of different products each division would be considered an independent operating center. …
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The Definition of an Operating Segment
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Download file to see previous pages Corporations that sell at the retail level, but who also have an online operation have multiple operating segments. The e-commerce operation would be considered an operating segment. Let’s take the Jiffy Lube business as an example. The money generated by the oil change operation would be considered an operating segment. The car wash operation of the business is another operating segment. Any food items sold inside the store in the waiting area would be a third operating segment of the company.
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I agree with your definition of an operating segment. It is imperative for the CEO or COO of a company to evaluate the performance of each operating segment on a recurrent basis. Whenever an operating segment starts to under perform that segment could become unprofitable. A strategy that can be used by management to eliminate operating segments that are not generating profits is divesture. Divesture can be defined as the partial or full disposal of an investment or asset through sale, exchange, closure or bankruptcy (Investopedia, 2011).
Investopedia.com (2011). Divesture. Retrieved September 7, 2011 from http://www.investopedia.com/terms/d/divestiture.asp#axzz1XEq4B6YF
Effective and successful managers are able to generate profits from all the operating segments of a company. On many instances companies achieve expansion by adding operating segments to their operations. ...
Two powerful stock exchanges are the NYSE and the LSE. The Securities and Exchange Act of 1933 requires companies to register with the SEC prior to going public. The Securities and Exchange Act of 1934 discusses the matter of being public. Once a company is public the SEC oversees its activities. The Securities and Exchange Act of 1934 regulates broker dealers and stock exchanges. 6. GAAP guidelines are used in the preparation of financial statement disclosures. Financial statement disclosures are comments or explanations listed in a company’s financial statements. Three types of items that are covered by disclosures and whose inclusion is mandatory based on GAAP rules are changes or errors, asset retirement and insurance contract modification. There are also voluntary disclosures included in the business reports of companies. Some voluntary disclosures include forward looking statements and management analysis. 5. The threshold to for an operating segment to be reportable is listed below: Reported revenue is at least 10 percent of combined revenue Reported profit (loss) is at least 10 percent of combined profit (loss) Assets are 10 percent or more of combined assets (Schroeder & Clark & Cathey, 2011). Schroeder, R.G., Clark, M.W., Cathey, J.M. (2011). Financial Accounting Theory and Analysis (10th ed.). New Jersey: John Wiley & Sons. 7. Weekly Summary Week 5 was very challenging, but I learned a lot about accounting during the week. The individual paper discussed pension funds. I learned that the use of pension funds became used a lot in corporate America after World War II. The accounting profession and the government have ensured that corporations respect the rights of retirees by properly funding pension funds. In ...Download file to see next pagesRead More
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