Which of the following statements is true?
A)If the segment margin is negative,the segment should be retained.
B)If the segment margin is negative,it should remain in operation until a better use can be found for its resources.
C)If the segment margin is negative,it should file for bankruptcy.
D)If the segment margin is negative,the operation should be dropped.

Question

Quizplus · Accepted Answer

If the segment margin is negative, it means that the segment is not generating enough revenues to cover its direct expenses and its share of common costs. In such a scenario, dropping the operation is the best choice, as it is not adding any value to the overall profitability of the company. Retaining the segment or waiting for a better use of its resources can result in further losses and drain on the company's resources. Filing for bankruptcy should be considered only as the last resort when all other options have been exhausted.

Which of the Following Statements Is True