Financial management w6 | Business & Finance homework help
The two main ways that a sinking fund can be set up are with the corporation itself managing the fund or by transferring it to an outside trustee. When the firm manages the fund, they have greater control over how much is put in each year and when funds will be used to repurchase bonds. An advantage of this approach is that firms can use existing cash flow rather than taking out additional loans which can reduce overall cost as well as save time in establishing the account.
When an outside trustee handles the fund, bondholders have more control and assurance their funds secure presented steady agent oversight provided naturally… Also since trustees certified oversee same any potential mismanagement issues avoided else would likely arise due conflict interest case corporate side decides manage instead plus time spent setting up account minimized here too!
However disadvantage downside comes form lack flexibility found former plus not mention extra costs incurred related hiring agent(s) etc.. Thus while both procedures beneficial depending differing needs organizations stakeholders must carefully weigh pros cons either one decide best course action going ahead.
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