Economics · Sinking Fund
What is the primary purpose of a 'sinking fund' established by a corporation?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1To distribute cash windfalls as interim dividends to equity shareholders.
- 2To periodically set aside revenue specifically for the orderly redemption of debt securities like bonds or debentures.✓
- 3To absorb operational losses incurred during sudden economic downturns.
- 4To accumulate capital specifically earmarked for unexpected litigation costs.
Correct answer
To periodically set aside revenue specifically for the orderly redemption of debt securities like bonds or debentures.
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