Reserve Fund (Noun)
Meaning
Funds taken out of earnings to provide for anticipated future payments.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The company sets aside a portion of its annual earnings to replenish the reserve fund, ensuring sufficient resources to cover future obligations.
- A reserve fund is established to provide financial backing for investments in emerging markets with uncertain returns.
- To mitigate potential future losses, the business allocates a fixed percentage of its profits to maintain a substantial reserve fund.
- Establishing a robust reserve fund allows for companies to better manage anticipated expenses, thereby reducing long-term financial risk.
- The financial institution requires borrowers to maintain a certain level of reserve fund as a condition for loan approval to ensure repayment capacity.