sinking fund


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Sinking fund

A fund to which money is added on a regular basis that is used to ensure investor confidence that promised payments will be made and that is used to redeem debt securities or preferred stock issues.

Sinking Fund

A fund or account into which a person or company deposits money on a regular basis in order to repay some debt or other liability that will come due in the future. For example, if one has a loan with a balloon maturity of seven years, one may put money into a sinking fund for seven years in order to be ready to pay off the principal when it comes due. Some bonds have sinking fund provisions, requiring the issuer to put money aside to repay bondholders at maturity.

sinking fund

The assets that are set aside for the redemption of stock, the retirement of debt, or the replacement of fixed assets.

Sinking fund.

To ensure there's money on hand to redeem a bond or preferred stock issue, a corporation may establish a separate custodial account, called a sinking fund, to which it adds money on a regular basis.

Or the corporation may be required to establish such a fund to fulfill the terms of its issue. The existence of the fund allows the corporation to present its investments as safer than those issued by a corporation without comparable assets.

However, sinking fund assets may be used to call bonds before they mature, reducing the interest the bondholders expected to receive.

sinking fund

a fund into which periodic payments are made which, with compound INTEREST, will ultimately be sufficient to meet a known future capital commitment or discharge a LIABILITY. Such a fund may be used to finance the replacement of FIXED ASSETS at the end of their useful life or to purchase back company loan stock or DEBENTURES upon maturity See also DEPRECIATION, definition 1.

sinking fund

a fund, into which periodic payments are made, that, with COMPOUND INTEREST, will ultimately be sufficient to meet a known future capital commitment or discharge a LIABILITY. Such a fund may be used to finance the replacement of FIXED ASSETS at the end of their useful life or to purchase back company loan stock or debentures upon maturity

sinking fund

Money set aside in a special account to which regular contributions are made by way of additional money and/or interest on the money,with the plans that by a specified date the fund will be sufficient for a particular purpose.Prospective homeowners may set up a sinking fund for a house down payment,and companies usually establish sinking funds to pay off bonds.

References in periodicals archive ?
Forecast-price valuations require a valuer to model capital recovery in such a way as to ensure that by the end of the forecast period the sinking fund will be adequate to provide for the purchase of a replacement property (similar in terms of its performance and income-producing potential to the subject) at expected new, and usually higher, prices.
With one exception, the sinking fund purchases resulted in a nearly monotonic decline in both the duration and face value of Treasury bonds held by the public during the 1880s.
But the fund was left in deficit, forcing Managing Agents Anchor Trust to increase the sinking fund contribution for new buyers to 10% of sale pr1ice in 2005.
The existence of a sinking fund, and the obligation to contribute to it, should force banks to consider a more prudent course of action and remove the tendency to look for short-term profits in risky areas without any concern for the long term.
Similarly, the ability to obtain outside financing and strong capitalization can compensate for the lack of both security and a sinking fund. Finally, it is worth noting the Tax Court's ruling in American Underwriters, Inc., v.
Also, the court accorded little weight to the absence of a sinking fund as a security device, as it found this factor and the lower court's emphasis on the fact that the advances were unsecured to be superfluous.
Furthermore, Indmar had not paid any dividends or created a sinking fund from which to repay the advances.
For me pensions give a whole new meaning to the term "sinking fund" and, like most of you, I can think of better things to spend my money on.
The second covenant package (PACK B) offers only a sinking fund covenant out of the four covenants studied, adding one additional layer of protection.
Most are based on the idea that some sort of sinking fund is desirable in order to provide the funds that will be needed to purchase the business interest of the uninsured owner at his or her death.
Examples of future value of annuity, sinking fund annuity, the number of periods necessary for periodic payments plus interest to accumulate to a future value, and the rate per period needed for periodic payment plus interest to accumulate to a future value are described.
They also found that there was no insurance on the investment, as buyers had been promised, and no sinking fund for investors to sell the contracts back to the companies, as had also been promised.