Segment forecasting. When we're building real financial models, it isn't usually sufficient to forecast revenues and margins on an aggregate basis for a company. This is because real companies typically have a number of different business segments that will have different economics. Disaggregating the information by product or market allows a better understanding of underlying Trends in those segments. For example here is a company that has both a retail and wholesale division. Although total revenue growth is 10% We can see that much of this growth is coming from the whole cell division whilst revenue growth in the retail business is pretty stagnant. By modeling revenue growth for each of these divisions separately will be able to provide a much better prediction of revenues in future years. Likewise it's also likely that these divisions will have quite different margins wholesale business often generates lower margins than a retail business. So it's likely that the analyst will also want to forecast margin separately for each segment. Even if a company sells predominantly one major product, for example, Coca-Cola's business if there are global business the different regions that they operate in might have very different economics and in this situation, we would still want to segment revenues and margins but this time it would be by region rather than by division. You can see for this company that although revenue growth is quite modest at two and a half percent revenues are actually falling in the emia region, but growing quite strongly in the Americas and Asia Pacific. Segmenting the forecasts will give us a much more accurate prediction of future revenues. One of the main limitations with segment forecasting is that we are dependent on how the company discloses its segments in its results. Companies are required to segment their disclosures based on how management monitor performance internally in a way. This is helpful as it allows us to see how management monitor their own business. However, it does mean that even if we want to forecast by geography we can't do this if the company provides segment disclosures by division. Also, even if companies report segments in the way we want they may not provide sufficient detail for our segment forecasts. For example analysts often want to forecast revenue and ebitdar by segment but a company might only disclose revenue and operating profit by segment without information on how depreciation amortization is allocated to each segment. We may be forced to make some assumptions about this or alternatively model margins on a combined basis.