October 25, 2000

Mr. Eduardo Manzano
GKNB Enterprise
Loyola Height
Quezon City

Dear Mr. Manzano:

We are glad to get the information in the financial statement which you returned to us on October 21, as it will enable us to serve you better now and in the future.

We note with interest that your sales show a substantial growth during the five months you have been in business.  Analyzing the Balance Sheet you sent us, we are obliged to conclude that your liabilities are excessive for the amount of your quick assets.  It seems to us that you are somewhat overstocked.  Of course you realize that under present condition of falling prices this is a dangerous position to be in, especially for a new business.

In view of these facts, we suggest that you cut down the size of your order to one half, or even one third, and that you let us ship the goods on a cash basis, subject to a 3% discount.  Ordering in small quantities would also protect you against serious loss from rapidly declining prices on large stocks of goods.

You may be sure that as soon as the condition of your business is such as to justify a line of credit, we shall be glad to let you have it.  We are prepared to make shipment of your order on the basis outlined above.  What do you say?

Sincerely,

Luiz Recto
Credit Manager