Cash Cow

AAA

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. Porter's 5 Forces

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

    A company’s business unit that has a small market share in a ...
  6. Star

    1. A type of candlestick formation that is identified when 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

    Explaining Accounting Conservatism

    Accounting conservatism is a principal that requires accounting rules be applied with high degrees of verification.
  6. Term

    What are Non-GAAP Earnings?

    Non-GAAP earnings are a company’s earnings that are not reported according to Generally Accepted Accounting Principles.
  7. Credit & Loans

    What's a Nonperforming Loan?

    A nonperforming loan is any borrowed sum where the borrower has failed to pay scheduled payments for at least 90 days.
  8. Economics

    Understanding Cost of Revenue

    The cost of revenue is the total costs a business incurs to manufacture and deliver a product or service.
  9. Economics

    Understanding Cash and Cash Equivalents

    Cash and cash equivalents are items that are either physical currency or liquid investments that can be immediately converted into cash.
  10. Economics

    Explaining Carrying Cost of Inventory

    The carrying cost of inventory is the cost a business pays for holding goods in stock.
RELATED FAQS
  1. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  2. How often should a small business owner go through a bank reconciliation process?

    Small business owners should go through the bank reconciliation process at least monthly, and many business consultants recommend ... Read Full Answer >>
  3. Why is a company's Cash Flow from Financing (CFF) important to both investors and ...

    A company's cash flow from financing activities (CFF) is important to investors and creditors because it depicts how much ... Read Full Answer >>
  4. What is the difference between recurring and non-recurring general and administrative ...

    The difference between recurring and nonrecurring general and administrative expenses can best be understood as the difference ... Read Full Answer >>
  5. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  6. What can working capital turnover ratios tell a trader?

    A company's working capital turnover ratio is traditionally positively correlated with business performance. A high, or better ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!