The date on which a cash dividend becomes a binding legal obligation is known as the:

• A. Declaration date
• B. Payment date
• C. Ex-dividend date
• D. Date of record

Answer: (A)

Verified step by step guidance

1. Understand the concept of a cash dividend: A cash dividend is a payment made by a corporation to its shareholders, typically as a distribution of profits.
2. Learn the key dates associated with cash dividends: Declaration date, Date of record, Ex-dividend date, and Payment date. Each has a specific role in the dividend process.
3. Focus on the Declaration date: This is the date when the board of directors formally announces the dividend and creates a binding legal obligation for the company to pay the dividend. It is the point at which the company commits to the payment.
4. Differentiate the other dates: The Date of record determines which shareholders are eligible to receive the dividend, the Ex-dividend date is the cutoff date for buying shares to qualify for the dividend, and the Payment date is when the dividend is actually distributed to shareholders.
5. Conclude that the Declaration date is the correct answer because it is the date when the company legally commits to paying the dividend.