Under what circumstances should a company stop saving into a sinking fund?
A)When the firm foresees closure and has no reason to replace depreciating equipment.
B)When prices of new equipment are rising dramatically.
C)Firms should never stop saving into a sinking fund.
D)When technological innovation in the industry is stagnant.

Question

Quizplus · Accepted Answer

A sinking fund is primarily used for replacing depreciating equipment or repaying debt. If a company foresees closure and has no future need for equipment replacement, it would be logical to stop contributing to a sinking fund.

Under What Circumstances Should a Company Stop Saving into a Sinking