Citizen Genet wrote:
Anonymous User wrote:They love to harp on the no debt thing. I really have no idea how important or rare that is.
I was initially impressed with this, but have come to learn it's all a facade. Many of the large firms have no debt - GDC, Jones Day, K&L. In addition to being common, many of the firms simply finance through private-partner loans. Instead of the business entity taking on debt, equity partners will take a loans to expand. I am not sure how common the latter practice is, but I imagine it is quite common.
I know this was a long time ago, but this isn't always true. Some firms rely off of private partner loans for expansion. There are also some that are "debt-free" in the sense that they have retained earnings in the form of cash or other liquid or semi-liquid instrument which they use to expand. This is significant because partners aren't taking out loans to expand. They may be taking a bet on their equity surviving, but in essence that is actually a strong sign of financial health-- a huge cash supply.
Also, all firms, even the "debt-free" firms take on a loan at the beginning of the year to cover day-to-day and yearly expenses for months until they are in the black (as opposed to dipping into retained earnings from the previous year to take care of business issues). This isn't the same as being leveraged for expansion though-- this is simply a working capital facility that most every firm will have.
So, they most healthy firms may finance with cash to expand, and not carry any debt besides some type of working capital facility.