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What is sinking fund approach?
A sinking fund approach is a type of economic approach that involves setting aside some profits over time. This money is often set aside to fund large capital expenses.
Results for: Sinking-fund
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In Stock Market
What is a fund of funds?
Funds of Funds A fund of funds represents a mutual fund that invests in other mutual funds. One of the best examples of this type of investment style is the target date …fund. These types of funds are designed to provide a broad based diversification. In target date funds, the portfolio of underlying funds allows the fund manager to shift investments as the fund nears its target date. In a target date fund, a date in the future is selected by the investor that often relates to the year in which they would like to retire. The fund manager shifts the portfolio from aggressive investments to more conservative ones over time. There are certain things an investor should consider before investing in this type of fund. One, the cost of owning these funds may be higher. These additional fees can be found in the prospectus under "Acquired fund fees and expenses" and should be added into the other fees the fund charges. Two, you must rely on the fund manager to achieve the diversity you want and allocate the assets accordingly. Three, these types of investments may be focused on matching the comparable benchmark rather than beating it. Carefully read the prospectus before investing, understand your risk tolerance and consider other opportunities such as index funds to meet your goals. (MORE)
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In Stock Market
What is the difference between amortization and sinking fund?
sinking fund is the setting aside of money for instance by the government to a pool to reduce its budget deficit while amortisation is the paying off of debts over a period of… time with a decreasing principal balances and interests (MORE)
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In Stock Market
What are debt funds in mutual funds?
Debt funds are specialized types of funds that invest in bonds and other debt instruments. Since they invest in debt instruments like government bonds, corporate bonds, de…bentures etc the returns are nearly guaranteed and at the same time, since they are safe instruments their returns are also only equivalent to bank deposits. Around 8-9% per annum. === Debt funds are funds that invest in long, medium or short-term income bearing instruments like corporate bonds, debentures, fixed deposits, treasury bills, commercial papers, etc. Debt funds guarantee a constant flow of returns and are less volatile than other equity funds that also form part of mutual funds investment. === Debt mutual funds are simply mutual funds that invest in an assortment of debt instruments like government bonds, fixed deposits and approved private deposits. Debt funds are primarily focused on getting regular returns. The fund invests in deposits with maturing tenures and varying interest rates. So when investing in these funds you should take care to match your individual time frame to that of the fund. The current income is also received in the form of dividend so the cash flow is generally tax free in the hands of investors. Debt funds are also highly liquid as they can be converted to cash easily and are useful in creating a well balanced portfolio. === Debt mutual funds are identical for parking time bound funds at minimal or no risk. Debt funds are useful for very conservative investors who don't want to take equity risk and want to keep their principal safe and earn decent return similar or slightly higher then bank fixed deposit or want to park their short term liquid funds. While investing in debt fund, one should be aware of the time horizon of investment after which he may require the funds for meeting his approaching goals. (MORE)
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What are the Advanatages and disadvantages of sinking fund method of depreciation?
Sinking Fund Advantages and Disadvantages On paper, sinking funds appear to be a great program for both businesses and their investors. However, there are advantages and disa…dvantages to using this type of fund. Investor Advantage: Piece of Mind For investors, these accounts represent peace of mind. Investors with securities backed by these funds know that the company is less likely to be unable to pay dividends. Additionally, corporate debentures supported by specialized funds are more likely to receive the principle payment upon maturity. Corporation Advantage: Long-Term Debt Management Sinking funds are created so companies can address their debt in advance. As such, businesses have the comfort of having established long-term solutions for handling their debt and repaying their investors. In addition, these accounts give businesses the opportunity to plan for the cost of purchasing new assets such as upgraded machinery, construction work, and new technology. Example Technicolor NationwideTechnologies (TNT) establishes a sinking fund at the beginning of its establishment in 1985. 10% of the overall profits are then invested into this account. In addition to these payments, the trust company invests the fund's assets into long-term low risk stocks and bonds to grow capitol. As computers and information technology changes, TNT is able to purchase new electronic equipment using the resources from the fund. Investor Disadvantage: Repurchasing of Bonds Corporations with sinking funds periodically repurchase securities and debentures before their maturity. As such, these bonds are repurchased without consent directly from stockholders and bondholders. Businesses can choose to "call" bonds at any time, and no choice is given to the investor about whether or not to part with their holding. Any investor whose bond is purchased will have to forfeit their interest payments. This creates an atmosphere of uncertainty for investors, as they have no knowledge of when a company will choose to purchase back bonds. Example Thomas and Jack have both purchased bonds from Harriet's Corporate Housing (HCH). Jack decides to sell his bonds but Thomas wants to hold onto his. However, HCH suddenly "calls" the bonds and purchases them from some investors, including Jack and Thomas. Jack doesn't mind, because he had already decided to sell his off his bonds. Unfortunately, Thomas is upset by his inability to choose to keep his investment, and by the unexpected loss of his interest payments. Investor Disadvantage: Repurchasing of Bonds at Lower Prices Not only do corporations repurchase bonds regularly, they do so at a lower price than the bond's initial value. This par value is usually less than what the bond is worth within the actual marketplace. Some companies will also wait for interest rates on bonds to go down before purchasing back securities. As a result, bondholders stand to lose substantial amounts of money when their bonds are repurchased by companies at a lower price than their initial investment. While sinking funds can represent a more secure investment, they also present the risk of a sudden loss at anytime. This lack of control should be carefully considered if you choose to invest in sinking fund backed stocks and securities. (MORE)
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Definition of sinking fund method?
Sinking fund method is a method of depreciation if a large sum of money is required for replacement of an asset at the end of its effective life it may not be advisable to lea…ve in the amount of depreciation set apart annually, for it may or may not be available in the form of the readily realisable assets to the concern at the time it is required. To safegaurd this position the amount annually provided for depreciation may be placed to the credit of the sinking fund account (MORE)
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Where does bond sinking fund go on balance sheet?
A bond sinking fund is reported in the section of the balance sheet immediately after the current assets. The bond sinking fund is part of the long-term asset section that usu…ally has the heading "Investments." The bond sinking fund is a long-term (noncurrent) asset even if the fund contains only cash. The reason is the cash in the fund must be used to retire bonds, which are long-term liabilities. In other words, because the money in the bond sinking fund cannot be used to pay current liabilities, it must be reported outside of the working capital section of the balance sheet. (Working capital is current assets minus current liabilities.) (MORE)
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How do sinking funds reduce default risk?
A sinking fund is a fund established by a government agency or business for the purpose of reducing debt by repaying or purchasing outstanding loans and securities held agains…t the entities. It helps keep the borrower liquid so it can repay the bondholder. It is just like a reserve fund which is used for repayment of loan. (MORE)
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What is better the you phone 5c or 5s?
the 5s because it has better service but it dosent have diffrent colrs just silver gold and black
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What is the answer to 20c plus 5 equals 5c plus 65?
20c + 5 = 5c + 65 Divide through by 5: 4c + 1 = c + 13 Subtract c from both sides: 3c + 1 = 13 Subtract 1 from both sides: 3c = 12 Divide both sides by 3: c = 4