CLM Financial Management & Legal Budgeting Flashcards
6 cards from real CLM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CLM Financial Management & Legal Budgeting flashcards as text
Which budgeting method requires each department to justify all expenditures from scratch each budget cycle?
Answer: Zero-based budgeting
Zero-based budgeting requires every expense to be justified anew each period rather than building on prior year figures.
In a law firm, which financial metric measures revenue generated per attorney relative to billable hours worked?
Answer: Realization rate
The realization rate measures how much of billed time is actually collected compared to standard rates.
What is the primary purpose of a trust account in a legal department?
Answer: To hold client funds separately from firm operating funds
Trust accounts segregate client funds from the firm's own money to comply with professional responsibility rules.
A legal manager reviewing a balance sheet would find which of the following classified as a long-term liability?
Answer: Office mortgage
A mortgage extends beyond one year and is therefore classified as a long-term liability on the balance sheet.
Which cost allocation method assigns overhead expenses based on actual activity drivers such as billable hours or document volume?
Answer: Activity-based costing
Activity-based costing links overhead costs to the specific activities that consume resources.
When a law firm's accounts receivable aging report shows significant amounts in the 90+ day bucket, what is the most immediate financial risk?
Answer: Cash flow shortfall
Old unpaid invoices indicate clients are slow or unable to pay, directly threatening the firm's cash position.