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Profitability Segment
Added by Smruti G., last edited by krishna priya on Oct 20, 2008 (view change)
What is the difference between Business Area, Profit center & Profitability Segment?
Business area is an organisational unit which corresponds to the specific business segment or area of responsibility. Identification of business area helps in segment reporting of a company in its financial statements. Business areas can be identified based on the products of the company or based on geographical area. Profit centers are internal areas of a company that have the responsibility for achieving target profits or productivity goals. The objective of business area is more for reporting purposes whereas profit center allows to analyse areas of responsibility and to delegate responsibility to decentralised units (eg., the various divisions within a company). Thus, profit center are basically treated as "companies within a company" and ensures effective control. Profitability Segment corresponds to market segment. The market segments can be defined as products, product groups, customers, customer groups, geographic areas, etc. For example, a company may wish to analyze profitability for a specific group of products that the company sells to a particular customer (or group of customers). When setting up CO-PA, the company will have broad flexibility to choose whichever characteristics are relevant for defining the company's market segments. Each unique combination of characteristic values (e.g. sales of product A to customer X) defines a profitability segment. Another viewpoint:
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