Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

What is the primary purpose of a sinking fund in relation to investments in securities?

To increase the market value of a company's stock

To accumulate funds for the repayment of a bond issue at maturity

To finance the purchase of new equipment

To provide dividends to shareholders on a regular basis

Previous problemNext problem

Verified step by step guidance

Understand the concept of a sinking fund: A sinking fund is a financial strategy used by companies to set aside money over time to repay a debt or bond issue at maturity. It ensures that the company has sufficient funds to meet its obligations when the bond matures.

Analyze the options provided in the question: Evaluate each option to determine which aligns with the primary purpose of a sinking fund. For example, increasing market value, financing equipment, or providing dividends are not directly related to the repayment of bonds.

Focus on the correct purpose: The primary purpose of a sinking fund is to accumulate funds specifically for the repayment of a bond issue at maturity. This reduces the risk of default and reassures investors about the company's financial stability.

Relate the sinking fund to bond repayment: Companies often deposit money into the sinking fund periodically, which can be invested in low-risk securities to grow the fund until the bond's maturity date.

Conclude the reasoning: Based on the explanation, the correct answer is 'To accumulate funds for the repayment of a bond issue at maturity,' as this aligns with the fundamental purpose of a sinking fund.