Under the Shelter Principle

question 85

Multiple Choice

Under the Shelter Principle:

• A) A holder may acquire the rights and privileges of an HDC even if the instrument is not transferred directly from an HDC.
• B) A holder may not acquire the rights of an HDC unless the instrument is transferred directly from an HDC.
• C) A holder who engages in fraud still may become an HDC if he or she later obtains the instrument from an HDC.
• D) The transferee does not acquire all the rights the transferor had in the item.
• E) The holder may not acquire the rights of an HDC if the instrument has been previously dishonored.

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Definitions:

Operating Income

The income a business receives after subtracting operating costs from its gross profit.

Fixed Costs

Costs that do not change with the level of production or sales activities, such as rent, salaries, and insurance premiums.

Variable Costs

Costs that change in proportion to the level of production or business activity.

Unit Contribution Margin

The amount each unit sold contributes to fixed costs and profit after variable costs are subtracted.