What is a sinking fund?
submitted by shpatil301

Robles

It's a reserve fund created by a company to set aside money over time. That money can be used for paying off debt, or purchasing expensive equipment, like in a factory. It helps a company avoid a huge shock of sudden expenses. It helps them absorb it over time, rather than suddenly have a huge hit to their bottom line. It also helps them keep their credit in excellent shape, because a good sinking fund helps them avoid debt.

Fools Verne

It's an account where a company regularly deposits money to pay off bonds and other long-term debt at some time in the future. It helps make debt repayment more manageable by spreading out the payments over several years, rather than doing it after the bank calls.

Smitty

A sinking fund is like a savings account that a company uses to save money gradually. It's for paying back bonds and loans when they are due. It helps them avoid having to pay a big lump sum all at once.

Aquella

It's a special fund where a business puts money over time so they can pay back money they borrowed. It's almost like a rainy day fund for paying off debt. Everyone should have something like that.