Cash Cow

DEFINITION of 'Cash Cow'

1. One of the four categories (quadrants) in the BCG growth-share matrix that represents the division within a company that has a large market share within a mature industry.

2. A business, product or asset that, once acquired and paid off, will produce consistent cash flow over its lifespan.

BREAKING DOWN 'Cash Cow'

1. A cash cow requires little investment capital and perennially provides positive cash flows, which can be allocated to other divisions within the corporation. These cash generators may also use their money to buy back shares on the market or pay dividends to shareholders.

2. This term is a metaphor for a dairy cow that produces milk over the course of its life and requires little maintenance. A dairy cow is an example of a cash cow, as after the initial capital outlay has been paid off, the animal continues to produce milk for many years to come.

RELATED TERMS
  1. BCG Growth Share Matrix

    A planning tool that uses graphical representations of a company’s ...
  2. Dog

    One of the four categories or quadrants of the BCG Growth-Share ...
  3. Cash Is King

    The belief that money (cash) is more valuable than any other ...
  4. Loss Leader Strategy

    A business strategy in which a business offers a product or service ...
  5. Porter's 5 Forces

    Named after Michael E. Porter, this model identifies and analyzes ...
  6. Problem Child

    A company’s business unit that has a small market share in a ...
Related Articles
  1. Retirement

    To Sell Or Not To Sell

    Learn some tips on how to exit a position to the best of your advantage.
  2. Investing Basics

    Conglomerates: Cash Cows Or Corporate Chaos?

    Huge companies may not be as infallible as previously assumed. Find out why bigger isn't always better.
  3. Fundamental Analysis

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  4. Investing

    Spotting Cash Cows

    We show you why some of these companies stand apart from the herd.
  5. Economics

    Understanding Cost-Volume Profit Analysis

    Business managers use cost-volume profit analysis to gauge the profitability of their company’s products or services.
  6. Fundamental Analysis

    5 Basic Financial Ratios And What They Reveal

    Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know.
  7. Investing Basics

    How to Analyze a Company's Inventory

    Discover how to analyze a company's inventory by understanding different types of inventory and doing a quantitative and qualitative assessment of inventory.
  8. Stock Analysis

    Understanding Chipotle's Financials (CMG)

    Learn about Chipotle Mexican Grill and its financial statements, including metrics such as comparable sales, operating margin and returns.
  9. Investing Basics

    How To Decode A Company’s Earnings Reports

    Earnings reports tell investors how a publicly-traded company is performing, but aren’t always easy to decipher.
  10. Economics

    The Basics Of Business Forecasting

    Whether business forecasts pertain to finances, growth, or raw materials, it’s important to remember that a forecast is little more than an informed guess.
RELATED FAQS
  1. What items are considered liquid assets?

    A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted ... Read Full Answer >>
  2. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  3. What are working capital costs?

    Working capital costs (WCC) refer to the costs of maintaining daily operations at an organization. These costs take into ... Read Full Answer >>
  4. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  5. How can companies use the cash flow statement to mislead investors?

    Cash flow is a means for most investors to examine the actual economics of a business they might invest in, especially from ... Read Full Answer >>
  6. Who actually declares a dividend?

    It is a company's board of directors who actually declares a dividend. The declaration date is the first of four important ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center