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What is a bond sinking fund?

A bond sinking fund is similar to restricted cash in the sense that the company must put aside to buy back bonds that the company had issued. A separate trustee would hold the cash for the company, which is why it is labeled as restricted cash. The company would classify the bond sinking fund as a non-current asset on its balance sheet.

Basically, its just cash set aside by the company to cover any bond payments it would need to make to holders of the bonds.

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