what are the disadvantages of a sinking fund 
the disadvantage of a sinking fund is that it limits the availability of cash on hand for a business this limited cash reduces the ability to invest and therefore earn a return it can be argued that this is not necessarily a disadvantage as the money in a sinking fund is used to pay off the debt that was raised to facilitate the needs of the business so a sinking fund is just a measure to prudently manage finances the bottom linesinking funds are a method for corporations to pay off debt setting aside money to pay off debts is a prudent financial decision for companies to manage their obligations when debt comes due companies that don t may struggle to find the capital to make good on their outstanding debt obligations 