Sinking funds
A)represent unrecoverable costs for firms.
B)essentially turn ongoing fixed costs into occasional variable costs.
C)are reserves used to manage the closing of a bankrupt firm.
D)essentially turn occasional variable costs into ongoing fixed costs.

Question

Quizplus · Accepted Answer

Sinking funds are essentially savings mechanisms set up by companies to accumulate funds over time to repay debt or replace assets, thereby converting what could be large, occasional expenses (variable costs) into smaller, regular payments (fixed costs). This helps in financial planning and stability.

Sinking Funds