Cash Cows Law and Legal Definition

Cash Cows are products or strategic business units within the organization’s mix which are characterized by high market share and low market growth, cash cows produce the revenue required to develop and support less successful or newer products. It generates unusually high profit margins. So high that it is responsible for a large amount of a company's operating profit. This profit far exceeds the amount necessary to maintain the cash cow business, and the excess is used by the business for other purposes. A firm is said to be acting as a cash cow when its earnings per share is equal to its dividends per share. This also implies that the firm is not investing in product improvements (distributing all earnings) and is essentially considering itself not in a growth market.