Why Do We Need a Sinking Fund? How to Establish a Sinking Fund and the Various Options Available
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Traditionally, businesses have used a "sinking fund" to set aside money on a regular basis in order to retire a bond or repay a debt. Using a sinking fund will reduce the amount that the company must pay out of pocket when the loan matures. However, the same method may be used to save money and avoid utilising credit cards or an emergency fund for unexpected expenses or large expenditures. Companies aren't the only ones that may benefit from sinking money; people can do the same.
In any case, what is the definition of a "sinking fund"?
The term "sinking fund" r...