Explain What an "Operating Segment" Is

question 27

Essay

Explain what an "operating segment" is.
For each of the examples below,determine what operating segments the company has and why?
a.A beverage company sells beer,wine and bottled water.The beer and wine are sold through liquor store outlets and directly to restaurants.The bottled water is sold to retailers.
b.A company sells leather apparel.The company designs,manufactures and retails these goods through their own retail outlets.There are primarily three divisions: (1)designing and sourcing and purchasing various raw materials;(2)manufacturing;and (3)distribution and retail.The design and raw materials flow through to the manufacturing division.All output of the manufacturing division is transferred to the distribution and retail division.Only the distribution and retail division has external revenues.The other divisions have internal revenues only.

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Definitions:

Ethical Conduct

Behavior that is consistent with principles of moral and ethical standards, which guide decision-making and actions.

External User

External User refers to individuals or entities outside of a company who use its financial statements to make decisions, such as investors, creditors, and regulatory agencies.

Federal Government

The national government of a federated state, which holds the authority to govern the issues that affect the entire country.

Financial Accounting Standards Board

An independent organization responsible for establishing and improving financial accounting and reporting standards in the United States.