Question

Why would the Global Financing segment hold 40% ($38,882/$97,310) of the segment assets, but generate only 3.6% ($4,073/$111,826) of total segment revenue?

Answer 1

The company facilitates clients so that they can get (acquire) computers and software. It actually finances to clients and manages risks.

There are so many acts of business, called segment, within the company and global financing is one of them. Each such segment provides information how it works in terms of earning revenues, incurring costs, and etc.

For the year 2012:

Segment revenue = $4,073

Total revenue = $111,826

Therefore, share of revenue = (4,073 / 111,826) × 100 = 3.6%.

Segment assets = $38,882

Total assets = $97,310

Therefore, share of assets = (38,882 / 97,310) × 100 = 40%

This is not the main business of the company, like computer selling, software installation, and technology service. Therefore, its share on total revenue is low compare to those main-stream businesses.

Since the segment facilitates and finances to others, it carries huge risk of defaulting; holding more assets can only protect from such risk. Therefore, the segment holds higher share of total assets compare to any other segments.