Cash Cow

Reviewed by Sujaini | Updated on Aug 26, 2020

What are Cash Cows?

Cash cow is one of the four groups within the growth matrix of the Boston Consulting Group (BCG), reflecting a company that has a large market share in a low-growth industry or a business. It is applied to an asset or a company that will continue to give steady cash flows throughout its lifespan until paid off.

A cash cow is also a reference to a business, product, or asset, which was once acquired and paid off, will produce consistent cash flows over its lifespan.

Understanding Cash Cows

A cash cow is a term for a dairy cow producing milk over a lifetime that requires little to no care. The term refers to a company which is low-maintenance. Modern cash cows need minimal investment capital and provide consistently positive cash flows that can be distributed within a company to other divisions. They are low risk, high reward investments.

The BCG grid, also known as the Boston Box or Grid, places the companies or goods of a company into one of four categories: star, question mark, bull, and cash cow. The matrix helps companies understand their position in terms of market share and the rate of growth in the industry. This serves as a comparative analysis of the ability of a company and a sector and demand assessment.

Nonetheless, some businesses, particularly large corporations, know that there are two types of companies/products within their portfolios. This is particularly true of product lines at various points in the life-cycle of the company. Cash cows and stars are more likely to complement each other, while dogs and question marks are less efficient in using resources.