ALA ALA Financial Management and Billing

Question 1

Which billing method charges clients a set fee per month regardless of hours worked?

Accepted Answer

Retainer billing

Answer

Hourly billing

Answer

Contingency billing

Answer

Blended rate billing

Question 2

Under the ABA Model Rules, which of the following makes a legal fee unreasonable?

Accepted Answer

Charging for work not performed

Answer

Billing at the agreed hourly rate

Answer

Sending itemized invoices monthly

Answer

Requiring a written fee agreement

Question 3

What does a law firm's realization rate measure?

Accepted Answer

Percentage of billed hours actually collected

Answer

Number of new clients per quarter

Answer

Ratio of associates to partners

Answer

Total billable hours logged per attorney

Question 4

Which document summarizes a law firm's revenues, expenses, and net income over a reporting period?

Accepted Answer

Income statement

Answer

Balance sheet

Answer

Cash flow statement

Answer

Accounts receivable ledger

Question 5

What is the purpose of a trust account in a law firm?

Accepted Answer

To hold client funds separate from firm operating funds

Answer

To pay attorney salaries

Answer

To fund marketing campaigns

Answer

To accumulate partner distributions

Question 6

Which financial metric indicates how quickly a firm collects outstanding invoices?

Accepted Answer

Days Sales Outstanding (DSO)

Answer

Net profit margin

Answer

Current ratio

Answer

Accounts payable turnover