What Is an Advantage of Issuing a Bond with a Sinking

question 188

Short Answer

What is an advantage of issuing a bond with a sinking fund provision?
This provision offers greater security to an investor because funds to retire the bond issue are set aside each year into the sinking fund.
The bonds may be converted to a specified number of shares of common stock at the firm's convenience.
The firm has the right to call in the outstanding bonds at any time and thus sink the bond issue.
The firm can decide to redeem the fund at any time.
The firm may retire portions of the bond issue at different predetermined dates.

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Definitions:

Ledger

A book or collection of financial accounts where all transaction records for a business are maintained.

Specific Asset

An identifiable and tangible asset that is required or utilized for a particular function or project.

Decreases

A decrease refers to a reduction in the size, amount, or number of something.

Source Documents

Original records or documents containing important details of a transaction, used as evidence and data for bookkeeping.