cash cow

noun

Definition of cash cow

1 : a consistently profitable business, property, or product whose profits are used to finance a company's investments in other areas

2 : one regarded or exploited as a reliable source of money a singer deemed a cash cow for the record label

Examples of cash cow in a Sentence

The football team was a cash cow for the university. The movie studio saw the actress as a cash cow.

Recent Examples on the Web

Most have few students relative to even bare-bones administrative costs, yet were seen prospectively as cash cows at their inception 20 years ago are now drains. — Edward Lotterman, Twin Cities, "Real World Economics: Student debt issue needs more study," 30 June 2019 San Diego County prosecutors recently alleged in a 235-page indictment that two men of the A3 Education corporation used Valiant Prep as a cash cow to fraudulently collect millions of dollars from the state for their own personal profit. — San Diego Union-Tribune, "‘Home school charters’ let families use state dollars to buy Disneyland tickets, horseback riding lessons and more," 16 June 2019 And companies best contribute to the common good by creating jobs and prosperity, not by serving as a cash cow for politically popular civic projects. — James Sutton, National Review, "Don’t Blame Big Tech for San Francisco’s Homelessness Crisis," 13 June 2019 Istanbul, which boasts a GDP bigger than Portugal’s and a budget of just over $4bn, has also become a cash cow for companies close to the ruling party. — The Economist, "A re-election in Istanbul tests President Erdogan’s power," 21 June 2019 Engines are a massive drag on earnings and cash during the design and ramp-up stages—they are normally sold at a loss—but become a cash cow later as operators need repairs. — Jon Sindreu, WSJ, "The Valuation Conundrum in the United Tech-Raytheon Merger," 20 June 2019 In response to critics who said the cameras were cash cows for cities, the Legislature put a $75 cap on fines for violators in 2007. — Scott Huddleston, ExpressNews.com, "Two San Antonio suburbs plan to keep red light cameras in place despite statewide ban," 17 June 2019 Get a crash course on all things yak—and their role in Himalayan life—with these surprising facts about Tibet’s version of a cash cow. — National Geographic, "What is a yak?," 26 Mar. 2019 These trends have been hitting P&G across the board, but particularly in its shaving and diaper businesses, two historic cash cows. — Aaron Back, WSJ, "P&G Needs a Workout, Not Vitamins," 19 Apr. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'cash cow.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Keep scrolling for more

Learn More about cash cow

Dictionary Entries near cash cow

Statistics for cash cow

Last Updated

14 Jul 2019

Look-up Popularity

Time Traveler for cash cow

The first known use of cash cow was in 1972

See more words from the same year

Keep scrolling for more

More Definitions for cash cow

cash cow

noun

Financial Definition of cash cow

What It Is

A cash cow is a business unit, product line, or investment that has a return on assets (ROA) greater than the market growth rate. The idiom refers to the idea that it produces "milk" (profit) long after the cost of the investment has been recouped.

How It Works

For example, let's assume that Company XYZ has five divisions, one of which makes widgets. The widget division manufactures and sells 85% of the widgets in the United States and has an ROA of 30%. The widget business, which is very mature, grows about 5% per year. In this scenario, Company XYZ's widget division is a cash cow. The low growth of the market means little investment is needed, and the high ROA indicates that profits in the division should be high -- higher than what is needed to maintain market share (this, incidentally, is why the excess cash generated by a cash cow doesn't need to be, nor should it be, reinvested in the cash cow).

Cash cows usually have large market shares in mature industries. The higher market share often implies or translates into the ability to produce at a lower cost, and for them, there is usually little reason to spend money on capturing more market share. It is possible, however, for a cash cow to dry up if competitors capture enough additional market share.

Why It Matters

Cash cows generate steady, reliable cash flows that often fund their own growth and the growth of a company's other business units. They can also generate the cash companies need to pay dividends or finance other endeavors. Importantly, they are often the reason lenders are willing to lend money to a company -- that is, the cash cow is the source of the lender's assurance that the company can service the debt. Thus, cash cows enable companies to leverage themselves in pursuit of other high-return opportunities.

Source: Investing Answers

cash cow

noun