Financial Resource Fits


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Financial Resource Fits: Cash Cows versus Cash Hogs: Different businesses have different cash flow and investment characteristics. For example, business units in rapidly growing industries are often cash hogs – the annual cash flows they are able to generate from internal operations are not big enough to fund their expansion. Business units with leading market positions in mature industries may be cash cows – businesses that generate substantial cash surpluses over what is needed for capital reinvestment and competitive maneuvers to sustain their present market position.

CORE CONCEPT: A cash hog is a business whose internal cash flows are inadequate to fully fund its needs for working capital and new capital investment.

CORE CONCEPT: A cash cow is a business that generates cash flows over and above its internal requirements, thus providing a corporate parent with funds for investing in cash hog businesses, financing new acquisitions, or paying dividends.


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