sinking fund

Definition

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.

Use sinking fund in a sentence

The sinking fund was increasing at an accelerating rate so we scaled back the deposits to better invest those funds.

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We set up the sinking fund in order to have some money over time for the stock and I thought it was a good decision.

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We had some long talks over whether it was time or not to have a sinking fund, as our analysis of the books indicated it could be warranted at this time.

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