Notice of Which of the Following Circumstances Should Alert a Purchaser

question 31

Multiple Choice

Notice of which of the following circumstances should alert a purchaser of a negotiable instrument that he might not be accorded the favored position of a holder in due course?

• A)The instrument has a limited indorsement.
• B)The instrument is overdue.
• C)The instrument is given as a security interest.
• D)None of the above.

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Definitions:

Cash Ratio

A liquidity ratio that measures a company's ability to pay off short-term liabilities with cash and cash equivalents alone, without selling or liquidating other assets.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of the business, whichever is longer.

Debt-Equity Ratio

This ratio, a test of financial leverage, divides a company's liabilities by its stockholders' equity.