Which of the following is true about a cash cow?
A) Cash cows can barely support themselves; in some cases, they actually drain off cash resources generated by other SBUs.
B) An SBU that is a cash cow has a small share of a high-growth market.
C) An SBU that is a cash cow has a large share of a market that is growing only slightly.
D) An SBU that is a cash cow has a high share of a high-growth market and typically needs large amounts of cash to support rapid and significant growth.
E) Cash cows generate large amounts of cash for the organization and are usually segments in which management can make additional investments and earn attractive returns.

Question

Quizplus · Accepted Answer

A cash cow is an SBU that has a large share of a market that is growing only slightly, but generates significant cash flow for the organization. It does not require large investments but continues to produce profits, hence the term "cash cow". Option A is incorrect because cash cows are profitable, and they do not drain off cash resources generated by other SBUs. Option B is incorrect because a cash cow typically has a large share of a market, but that market is not necessarily high-growth. Option D is incorrect because a cash cow does not typically require large amounts of cash to support growth, as it is already a significant player in its market. Option E is partially correct, as cash cows do generate large amounts of cash, but it is not always the case that management can make additional investments and earn attractive returns, as the market may not be growing rapidly enough to support expansion.

Which of the Following Is True About a Cash Cow