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What is the concept of sinking fund investment?

Accounting
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Question added by manaf almas , Auditor , DAR AL NUZUM PUBLIC ACCOUNTANTS
Date Posted: 2013/09/26
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Nirav Pandya
by Nirav Pandya , Senior Executive Accounts , Ammann Apollo India (P) Limited

A fund into which a company sets aside money over time, in order to retire its preferred stock, bonds or debentures. A fund into which a company sets aside money over time, in order to retire its preferred stock, bonds or debentures. In the case of bonds, incremental payments into the sinking fund can soften the financial impact at maturity. Investors prefer bonds and debentures backed by sinking funds because there is less risk of a default.   Read more: http://www.investorwords.com/4593/sinking_fund.html#ixzz2gBaZgC3u  

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