Sinking fund意思

A sinking fund is a type of savings account or fund that a company sets aside to pay off a debt or a liability in the future. The fund is typically used to pay off bonds or other types of long-term debt, and the money is set aside on a regular basis to ensure that the company will have enough money to pay off the debt when it comes due.

The purpose of a sinking fund is to ensure that a company has the cash on hand to pay off its debts, rather than having to refinance the debt or borrow more money to pay it off. This can help to reduce the risk of default and can also help to improve the company's credit rating, as it demonstrates that the company is financially responsible and is taking steps to manage its debt.

Sinking funds can be used for a variety of purposes, including the retirement of bonds, the repayment of loans, and the funding of capital expenditures. They can be funded through a variety of means, including setting aside a portion of the company's profits, issuing new debt or equity, or using other sources of cash.