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 profitabi
