Future Business Leaders of America (FBLA) Securities and Investments Practice Test

What is the meaning of the Ex-Date in financial transactions?

1. The date shares are created

2. The date after which buyers are not entitled to receive the declared dividend

3. The date when the Board approves new shares

4. The date when stock is officially transferred

The correct answer is: The date after which buyers are not entitled to receive the declared dividend

The Ex-Date is a critical concept in the realm of dividends and stock transactions. It specifically refers to the date set by a company when it determines which shareholders are entitled to receive the declared dividend. On this date, shares begin trading without the value of the next dividend payment, meaning that anyone who buys shares on or after the Ex-Date will not receive the dividend. For investors, this is an important date because it impacts the timing of dividend payments and investment strategies. If someone purchases shares before the Ex-Date, they will be eligible to receive the dividend. However, if they purchase on or after the Ex-Date, they will not benefit from that declared dividend, affecting their potential returns. This understanding helps investors and traders make informed decisions regarding their investments, particularly around dividend-paying stocks. The other options pertain to different processes related to stock transactions but do not accurately reflect the definition of Ex-Date in relation to dividend entitlement.