Cash Accounting

Finance a la shmoop what is a cash cow? that feels good [Person milking a cow]

mmm that's the spot yep that's me I'm a cash cow and boy howdy does that ever

feel good in the morning well I'm a type of company that's a natural part of the

business cycle and which kind of goes like this [Business cycle chart appears]

early companies are cash pigs those pigs eat everything including tons of cash

and let me tell you what comes out of them

it ain't milk...young companies need cash capital to grow like to build server

farms yeah like that and you know different kinds of farms and oil rigs

and chemical synthesizing plants and tractors smelting factories and stamping

machines and massive robotic thingamabob makers those well those early companies

chew up tons of cash as they build their business early in their cycle building

revenues and they might burn, i dunno five million dollars in year 1 to make 1 [Stack of cash burning]

million dollars in revenues not profit that's just in revenues then they pig

out on 20 million dollars in losses in year 5 but by then maybe they have a

hundred million dollars in revenues then they begin to chill as they grow out of

being a pig into yes higher life-forms like me where they maybe start to break

even on 500 million in revenues and no losses and no profits just

breakeven and by the time they've truly evolved into me, way over here on the

bell curve of their lifecycle then they're producing tons of cash like this

CD company which now has three billion dollars of revenue in a billion bucks in [CD 'R' Us store appears]

cash profits unfortunately its future doesn't look all that great as revenues

have likely more than peaked and it'll produce a whole lot less cash in the

next decade as they you know kindly put it out to pasture so if it doesn't buy

more growth companies with its cash yeah then it becomes dinner [Butcher slicing meat and blood appears on camera lens]