Perspective
Aug. 23, 2014
Turn billings into gold
Law firms have few revenue generating assets, so managing "potential" receivables (aka work in process) is important, but not well understood. And it's critical to survival of the firm. By Edwin B. Reeser
Our first foray into analyzing law firm failures focused on liquidity. This second expedition focuses on "activity ratios," and we will transition to exploring "profitability ratios" in a later installment.
Activity ratios have one foot planted in liquidity, one in profitability. The reason is they are based on assets (receivables, inventories, total assets) and their conversion to cash. For cash basis reporting, a...
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