Cash Cow: Definition, Investment Type, And Examples

(Many of the links in this article redirect to a specific reviewed product. Your purchase of these products through affiliate links helps to generate commission for LiveWell, at no extra cost. Learn more)

What is a Cash Cow?

When it comes to financial terms, a “cash cow” is not referring to a farm animal but instead, it refers to a business or investment that generates a consistent and significant amount of cash flow over an extended period of time. In other words, it is a profitable venture that continues to bring in substantial profits year after year.

Investment Type

Now that we understand the meaning of a cash cow, let’s take a closer look at how it fits into the realm of investments. Cash cows are considered one of the four classifications of products or business units within the Boston Consulting Group (BCG) Growth-Share Matrix. This matrix is a strategic tool used by businesses to analyze their portfolio of products and make decisions on resource allocation.

Examples of Cash Cows

Now that we have a better understanding of what a cash cow is and how it fits into the investment landscape, let’s explore some real-world examples:

1. Microsoft: Microsoft has been a cash cow for decades, primarily due to its dominant position in the software industry with products like Windows and Office. These products have maintained a strong user base and continue to generate substantial revenue.
2. McDonald’s: For many years, McDonald’s has been a prime example of a cash cow. With its well-established brand, a vast network of franchisees, and a loyal customer base, McDonald’s consistently generates high profits.
3. Coca-Cola: Coca-Cola is another classic example of a cash cow. With its iconic brand and a global market presence, Coca-Cola continues to generate steady cash flow through sales of its various beverages.

So, the next time you hear the term “cash cow,” remember that it refers to a profitable venture that continues to bring in substantial profits year after year. Microsoft, McDonald’s, and Coca-Cola are just a few examples of cash cows that have stood the test of time. Now it’s time for you to explore and find your own cash cow!