sinking fund

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Related to sinking funds: amortization, Call provision

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 ?
It comes as no surprise that the operation of a sinking fund when managing property is considered as best practice and critical to effective property management.
MFABC's available liquidity to respond to temporary payment interruptions includes a modest DRF of C$109 million, C$3.2 billion from sinking fund set-asides and C$64 million in the Strategic Retention Fund (as of the fiscal year-end Dec.
Between 1879 and 1890, however, the Treasury enjoyed large fiscal surpluses and Treasury Secretaries regularly employed the sinking fund to retire outstanding Treasury debt.
In July 1988, the Federal National Mortgage Association (FNMA) issued $500 million principal amount of 8.70% indexed sinking fund debentures (ISFDs) |5~.
Summary Statistics on Sinking Funds and Issuer Prepurchases
The best way to plan for big ticket expenses is to have sinking funds, a finance term for setting aside a specific amount each month ahead of the payment schedule.
The increased adjusted EBITDA in the second quarter of 2016 led to improved operating cash flow which in turn enabled the Company to continue to reduce overdue local payables and to generate $2.3 million of Excess Cash Flow that has been deposited into the sinking funds for the 2018 and 2020 Debentures.
Additionally, MFABC returns all excess earnings on sinking fund investments to its borrowers, once sinking funds have earned enough to satisfy associated debt service requirements.
Because sinking funds are available to replace deteriorating assets, the town is able to proceed with the replacement of capital on schedule.
Kao and Wu [13] report that 60% of their sample of industrial bonds issued during 1984 and 1985 did not have a sinking fund, although those without sinking funds had an average maturity much shorter than bonds with such provisions.
Sinking funds into the existing 90-year old plant would ve been the biggest waste of money.
"In some cases, developers have provided for these future costs by creating sinking funds and including the costs of these funds within the service fees.