sinking fund


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sinking fund,

sum set apart periodically from the income of a government or a business and allowed to accumulate in order ultimately to pay off a debt. A preferred investment for a sinking fund is the purchase of the government's or firm's bonds that are to be paid off. Usually the fund is administered by a trustee. See amortizationamortization
, reduction, liquidation, or satisfaction of a debt. The term amortization may also refer to the sum used for that purpose. The term is commonly used in ascertaining the investment value of securities.
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sinking fund

[′siŋk·iŋ ‚fənd]
(industrial engineering)
A fund established by periodically depositing funds at compound interest in order to accumulate a given sum at a given future time for some specific purpose.
References in periodicals archive ?
Sinking funds mitigate this risk by providing not only a forecast of the asset's replacement date (in conjunction with life cycle cost analysis), but the forecast replacement cost and how much capital needs to be put aside each year to ensure these funds are available when they are needed.
31, 2017, MFABC had C$4.4 billion in outstanding principal on loans to clients (net of sinking funds).
Finally, the Hoskold method (the sinking fund specific premise) employs some intermediate safe rate (15) or risk-free rate (16) to provide for the accumulation of a sinking fund, which is greater than zero but less than the discount rate.
Between 1879 and 1890, however, the Treasury enjoyed large fiscal surpluses and Treasury Secretaries regularly employed the sinking fund to retire outstanding Treasury debt.
Since the flats came on the market in 1986, owners, when selling, have paid one per cent of the resale value of their property into the sinking fund to pay for future repairs.
He added: "We've tried to find ways of gradually managing the reductions, through the sinking fund, special winter midweek jump prize-money payments and a minimum BDR, for instance.
An alternative is to have the grantor make a smaller loan that will function as a "sinking fund" designed to be consumed over the term of the promissory note.
Putting aside 5 percent of weekly collections for a sinking fund is critical.
Banks should have a duty to contribute to a sinking fund when times are good and this money, rather than the taxpayer's, would be used when times are bad.
Whether Indmar Products needed the advances when they were made was irrelevant As for the absence of a sinking fund, the Sixth Circuit ruled that it was unimportant, because Indmar Products was adequately capitalized and had easy access to outside credit.
Fifth, the taxpayer did not establish a sinking fund for repayment.
When there is a dispute, the courts look at factors such as the presence or absence of a written note, scheduled payments, a fixed interest rate, interest payments, collateral and a sinking fund. In addition, courts examine the corporation's use of the transferred funds, its capital structure and its source of funds to make repayment.