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🇺🇸 Certified Legal Manager (CLM) · flashcards
Certified Legal Manager (CLM) Financial Management Flashcards
60 question-and-answer cards covering Financial Management as it is examined in Certified Legal Manager (CLM). 24 of them are printed below, taken from across the deck — no signup, no paywall on the preview.
24 sample cards from the Financial Management deck
Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.
What is a retainer, and how does an evergreen retainer work?
A retainer is an advance payment held in trust against future fees. An evergreen retainer requires the client to replenish it to a set minimum as fees are drawn down.
What is the purpose of an engagement letter?
To define the scope of work, fee arrangement, billing terms, and the parties' responsibilities, forming the contractual basis of the attorney-client relationship.
What is a blended rate?
A single hourly rate charged for all timekeepers on a matter regardless of their actual individual rates, averaging across seniority levels.
What is the typical timekeeping-to-billing workflow in a law firm?
Record time → review/edit entries → generate pre-bills (drafts) → partner/attorney review and adjust → finalize and issue invoice → post to A/R → collect payment.
What is a pre-bill (proforma bill)?
A draft invoice circulated to the billing attorney for review and edits (write-downs, narrative changes) before the final bill is sent to the client.
What is a write-down versus a write-off?
A write-down reduces billable time/fees before invoicing; a write-off removes an amount already billed (in A/R) that the firm decides not to collect.
What does the term 'WIP' (work in process) mean in legal billing?
Unbilled time and costs already recorded for client work but not yet invoiced; it is inventory awaiting billing.
What is accounts receivable (A/R) aging?
A report grouping outstanding client invoices by how long they have been unpaid (e.g., 0–30, 31–60, 61–90, 90+ days) to prioritize collection efforts.
What is days sales outstanding (DSO) and what does it tell you?
DSO = (Accounts Receivable / Total Credit Billings) × Number of Days. It measures the average number of days it takes to collect payment after billing.
What is the allowance for doubtful accounts?
A contra-asset estimate of receivables not expected to be collected, reducing A/R to its realizable value on the balance sheet.
Under accrual accounting, when is fee revenue recognized?
When it is earned—as legal services are performed—not necessarily when the client is billed or pays.
In a partnership, how is profit typically distributed to partners?
Through draws/distributions of net income allocated by each partner's ownership percentage or a compensation formula, not as salary/wages.
Why is cash flow management distinct from profitability?
A firm can be profitable on paper (accrual income) yet run out of cash if receivables are slow or expenses are paid before fees are collected; cash flow tracks actual liquidity timing.
What is working capital and how is it calculated?
Working capital = Current Assets − Current Liabilities; it represents the short-term funds available to run daily operations.
What is the difference between tax compliance and tax planning?
Tax compliance is meeting filing and payment obligations accurately and on time; tax planning is structuring transactions in advance to legally minimize tax liability.
How is a law firm partnership generally taxed (pass-through)?
As a pass-through entity: the partnership itself pays no income tax; profits and losses flow through to partners who report and pay tax on their shares individually.
What is capital structure?
The mix of debt (loans/lines of credit) and equity (partner capital) a firm uses to finance its assets and operations.
What is a partner capital account?
A ledger tracking each partner's equity: capital contributed, plus allocated profits, minus draws/distributions and allocated losses.
What is a capital contribution (buy-in) for a new partner?
The investment a newly admitted partner pays into the firm to acquire an equity stake and fund their share of working capital.
What is the difference between liquidity and solvency?
Liquidity is the ability to meet short-term obligations with available cash/assets; solvency is the ability to meet long-term obligations and remain financially viable overall.
In investment/asset management, what does diversification accomplish?
Spreading investments across different assets to reduce overall risk, since losses in one holding may be offset by gains in others.
What is depreciation and why is it recorded?
The systematic allocation of a tangible asset's cost over its useful life, matching the expense to the periods that benefit from the asset's use.
What is return on investment (ROI) and its formula?
ROI = (Net Gain from Investment / Cost of Investment) × 100%; it measures the profitability of an investment relative to its cost.
What is liquidity risk in managing firm assets and reserves?
The risk that an asset cannot be converted to cash quickly enough, or without significant loss, to meet obligations when they come due.
What this deck covers
The Financial Management deck follows the Certified Legal Manager (CLM) Financial Management syllabus — 4 chapters and 16 topics — so questions land on material that is genuinely examinable rather than trivia around it. That works out to roughly 15.0 cards per chapter.
Answers are written to be recallable, not just readable — averaging about 143 characters, which is long enough to carry the reasoning and short enough to say out loud.
A deck like this earns its keep on the second and third pass. Read the syllabus first so you know the shape of the subject, then use the cards to find the specific facts that have not stuck.
Financial Management flashcards FAQ
How many Financial Management flashcards are in this Certified Legal Manager (CLM) deck?
60 cards. This page previews 24 of them, sampled evenly across the deck so you can judge the difficulty before installing anything.
Are these Certified Legal Manager (CLM) flashcards free?
Yes. The preview here is free to read with no signup, and the full 60-card deck is free inside the Examius app.
What do the Financial Management cards cover?
They follow the Certified Legal Manager (CLM) Financial Management syllabus — 4 chapters and 16 topics — so the questions track what is actually examinable.
How should I use these flashcards?
Read the syllabus first so you know the shape of the subject, then drill the deck. Examius schedules each card with spaced repetition, so cards you keep missing come back sooner and ones you know drift further apart.