Define Cash Cow

Cash Cow

What Is a Moneymaker, Exactly?

In the growth-share, BCG matrix, a moneymaker is one in every of the four classes (quadrants) that symbolises a product, line of business, or firm with a considerable market share among a mature business.

A moneymaker is additionally a term wont to describe an organization, product, or quality that, once purchased and got, would supply steady money flows over time.

TAKEAWAYS vital

• A moneymaker may be a firm or unit that, once got, can give consistent income for the remainder of its existence.

• A moneymaker is additionally one in every of the four quadrants of the BCG matrix, that examines the value of varied company divisions.

• Cash cows are a part of established, slow-growing sectors that have a large market share and need very little capital to prosper.

Recognizing money Cows

A moneymaker may be an image for a milk cow that has milk and needs very little to no care throughout its life. The term is employed to explain a firm that's additionally low-maintenance. Modern money cows need very little initial investment and systematically give positive money flows, which can be wont to fund alternative divisions among an organization. they're investments with a borderline risk and a good return.

The BCG matrix, a business unit organisation system established by the Boston Consulting cluster within the early Seventies, has four quadrants, with money cows being one in every of them. The BCG matrix, typically referred to as the Boston Box or Grid, assigns a star, punctuation, dog, or moneymaker to associate degree organization's operations or merchandise. The matrix will assist firms discern wherever they're in terms of market share and business rate. It's a comparative review of a company's potential, moreover as an associate degree assessment of the business and market.

However, some firms, significantly major organisations, recognise that the companies and merchandise in their portfolio comprise one in every of 2 teams. This can be very true for product lines at numerous stages of their life cycle. Dogs and question marks consume resources inefficiently, however money cows and stars complement one alternative.

A moneymaker may be a firm, product, or quality that generates constant income over time; it is also one in every of the four quadrants of the BCG Matrix, that may be a business unit organisation approach.

Example of a moneymaker

A moneymaker may be a mature slow-growth industrial company or business unit. Money cows account for a big portion of the market and want very little investment. Apple's (AAPL) moneymaker, for instance, is the iPhone. Apple will pay the excess financial gain earned  by the iPhone into alternative initiatives or merchandise since its come back on assets is significantly higher than its market rate.

Cash cows like Microsoft (MSFT) and Intel (INTL) pay dividends and have the power to boost them thanks to their giant free money flows, that are outlined as money flows from operations less capital expenditures. These businesses ar tried and true and do not need the maximum amount of funding to expand. they're defined by important profit margins and a powerful market position.

monetary flow Slow-growing companies or business divisions with well-known business names can even be money cows.

Particular Points to think about

In the BCG matrix, a star may be a firm or business unit that achieves a high market share in high-growth areas, as critical a moneymaker. Stars value plenty of cash to start out, however they will pay off success. Stars might become money cows if a correct technique is enforced.

In a high-growth business, question marks represent business units with very little market share. To grab further market share or maintain their current position, they have plenty of money. Question marks will seem in any of the opposite quadrants, counting on the firm's approach.

Finally, dogs are low-market-share business units in low-growth economies. they do not take plenty of cash to induce started, and that they do not produce plenty of cash. In an attempt to save lots of the organisation, dogs are oftentimes phased out.