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

The segment made up almost a third of Softbank’s operating income for the quarter ended June and has been a stable cash cow for the company. — Jacky Wong, WSJ, "The Real World Is Getting Complicated for SoftBank," 1 Nov. 2018 Even the company’s cash cow, Amazon Web Services, has showed some weakness relative to lofty expectations as rivals Microsoft Corp. and Alphabet Inc. chip away at market share. — Laura Stevens, WSJ, "Amazon Reports Another Profit but Sales Underwhelm," 25 Oct. 2018 Mainstream productivity, one of Microsoft's major cash cows, is being handled by Google's online services—maybe not for every student, every time, but for a chunk of them. — Peter Bright, Ars Technica, "$600 Chromebooks are a dangerous development for Microsoft," 1 Sep. 2018 The game of Monopoly, a legendary cash cow for Hasbro, has remained relevant and compelling for more than 100 years by evolving with the times. — Josh Linkner, Detroit Free Press, "New Monopoly game created for cheaters, questionable behavior," 25 May 2018 THE SWAMP Supreme Court's Janus ruling will end cash cow for liberal activists: experts. — Fox News, "FOX NEWS FIRST: Trump slams OPEC over gas prices; porn star lawyer eyes 2020 presidential run," 5 July 2018 For years, health systems rushed enthusiastically into expensive medical technologies such as proton beam centers, robotic surgery devices and laser scalpels — potential cash cows in the one economic sector that was reliably growing. — Jay Hancock, Washington Post, "As Proton Centers Struggle, A Sign Of A Health Care Bubble?," 2 May 2018 General Motors is stepping up its defense of the Escalade SUV, a cash cow for Cadillac and the company, by offering $10,000 discounts to some current customers to keep them from straying to Ford’s hot-selling new Lincoln Navigator. — BostonGlobe.com, "Bertucci’s files for bankuptcy," 17 Apr. 2018 Judging by its peers, the longtime cash cow could have an enterprise value of around $65 billion. — Jacky Wong, WSJ, "SoftBank Burns Bright for a Tiger," 12 July 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.

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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