Read the following discussion and give response: The definition of cash cow is often related to a
Question:
Read the following discussion and give response:
The definition of cash cow is often related to a product or can be a service that is very profitable. The product or service will most likely outshine the market and achieve a lot more cash than it is required to keep up with its position in the market. Cash cows can also have its disadvantages. They can make it very difficult to get into a given market. A company might use the excess money received from the cash cow to get hold of other businesses or to create newer products. Cash cow can also be in relation to a part of a company or division that frequently makes overabundance of cash. When a company is in the growth stage they will want to invest a lot into advertising, promotion, and infrastructure growth. The company can soon change and will want to decrease the amount invested into advertising and promotional activities and infrastructure growth, once the company starts to change into the cash cow stage. The change will be shown in the statement of cash flows and operating cash flows will be increased and the uses for the activities invested will be decreased. Declining cash flows from the operations is how the decline of a cash cow would be reflected in the statement of cash flows. The sales that are declining from the dying cash cow products will be the outcome from having the decline of operating cash flows. If a company has a profitable cash cow it can make the business have the money for testing and changes, and can bring up higher margins. I believe to have a good plan of action for a cash cow; a company should have to be good in budgeting, marketing and prioritizing.
Cost Management A Strategic Emphasis
ISBN: 978-1259917028
8th edition
Authors: Edward Blocher, David F. Stout, Paul Juras, Steven Smith