Analyzing Revenues Revenue sources Diversified Companies present special challenges Different segments usually experience varying rates of profitability, risk, and growth Asset com position and financing requirements of segments often vary Evaluation, projection, and valuation of income is aided by segment analysis Segments share characteristics of variability, growth, and risk Income forecasting benefits from forecasts by segments Must separate and interpret the im pact of individual segments
Analyzing Revenues Revenue Sources Diversified Companies present special challenges • Different segments usually experience varying rates of profitability,risk, and growth • Asset composition and financing requirements of segments often vary • Evaluation, projection, and valuation of income is aided by segment analysis • Segments share characteristics of variability, growth, and risk • Income forecasting benefits from forecasts by segments • Must separate and interpret the impact of individual segments
Analyzing Revenues Revenue sources Analysis tools to assess earnings quality and growth opportunities Segment Breakdown of Earnings Contribution and Growth Segmented earnings contribution matrix
Analyzing Revenues Revenue Sources Analysis tools to assess earnings quality and growth opportunities Segment Breakdown of Earnings Contribution and Growth Segmented earnings contribution matrix
Analyzing Revenues Revenue sources Earnings Contribution and Growth Rates by Segments Earnings Growth Rate of Earning Contributions Contribution for past Segments s thousands) Three Years Leisure goods: Camping equipment 100 1% Fishing equipment 2 Boats and accessories 02 Sporting goods Clothing apparel: Dress 85 Casual $$$ 72 Sports Education: 328536 Textbook publishing 40 Papers and supplies 17 Total $46
Analyzing Revenues Revenue Sources Earnings Contribution and Growth Rates by Segments Earnings Growth Rate of Earning Contributions Contribution for Past Segments ($ thousands) Three Years Leisure goods: Camping equipment $ 100 11% Fishing equipment 50 2 Boats and accessories 72 15 Sporting goods 12 3 $ 234 Clothing apparel: Dress $ 85 2 Casual 72 8 Sports 12 15 $ 169 Education: Textbook publishing $ 40 3 Papers and supplies 17 6 $ 57 Total $ 460
Analyzing Revenues Revenue sources Segmented Earnings Contribution Matrix Growth Rate(in percent) Segment 0-5 5-10 10-15 Total Leisure goods 62 0 172 $234 Agribusiness 85 72 12169 Education 40 57 Total $187$89$184$460
Analyzing Revenues Revenue Sources Segmented Earnings Contribution Matrix Growth Rate (in percent) Segment 0–5 5–10 10–15 Total Leisure goods $ 62 $ 0 $ 172 $ 234 Agribusiness 85 72 12 169 Education 40 17 0 57 Total $187 $ 89 $ 184 $ 460
Analyzing Revenues Revenue sources Full disclosure by segments is rare because of Difficulties in separating segments Management's reluctance to release information that can harm its competitive position
Analyzing Revenues Revenue Sources Full disclosure by segments is rare because of: • Difficulties in separating segments • Management’s reluctance to release information that can harm its competitive position