EOM/ End of Month
Likewise, the seller
Frequency of purchase or other
circumstances may make necessary for
certain special treatment of individual
cases. One such special arrangement was
the “E.O.M.” or “End of Month”.
This arrangement springs from the need of
the active buyer convenience in making
payments, and from the desire of sellers to
encourage the concentration of the
business. E. O. M. makes it necessary for
the buyers to issue checks to the seller
throughout the month in order to earn
discounts. It also helps facilitate the
seller’s bookkeeping. In many lines, this
arrangement is no longer confined to the
active accounts, but is allowed, generally
speaking.
Under this arrangement, it is understood
that all shipments made during a they were
made on the last day of the month, and the
terms run from the last day.
For example, shipments made on any day
during September are treated as dated as
September 30. When the terms are, for
instance, 2 per cent, 10 days, the change to
2 per cent, 10 days, E.O.M. means that the
September bills are payable on the tenth of
October, instead of being payable on 10
days from their various dates in
September.
A modification of the E.O.M. arrangement
is sometimes adopted. This provides for
two payments a month. Under the plan, all
bills dated from first to the fifteenth of the
month are considered as dated from the
sixteenth to the end of the month and are
considered as dated the last day of the
month.
Other departures from the regular terms
occur in order to meet competitive
conditions or the special exigencies of the
buyer. Thus, in a buyer’s market, the sharp
buyer for no good reason at all, may ask
for the extra dating.
may yield to the importunities of buyers
who plead special circumstances as the
opening of a new store, the putting up of a
new building. Special dates, the limitation
upon purchases for a period are among the
reasons commonly adduced or given.
The assumption is that the buyer must
keep his financial affairs in good order,
and this angle is usually considered in
connection with the request for extra
dating. The consent through could mean
the aggravation of a risk although at times
there may exist some justifications in
exceptional cases where the set-up is
essentially sound.
Many factors are at work to justify the
shortening of terms. The business turnover
has been considerably quickened. This is
due to more rapid facilities for distribution,
and the tendency to buy in smaller
quantities and carry less stock.
In some lines, too, the intervention of
finance companies in installment
transactions enables manufacturers to
realize cash on their shipments at the time
of their delivery.
PROFITABILITY
- It is measured by the success of a
business in maintaining and
increasing the owner's equity. The
nature and amount of earnings as
well as their regularity and trend
are all significant in this appraisal.
- It measures the company’s
operating performance and its ROI.
it also gauges the management’s
efficiency in using its resources to
generate revenue.
ENFORCEMENT
1. Granting credit is but one phase of the
credit function, collection is another.
Collection of accounts should start from
the moment they become due. There
should be no room for vacillation insofar
as collection is concerned.
2. The task and responsibility of every
collection department is to get the
customer, doubtless, this should be done.
3. Collection records must be kept and
maintained and should indicate when
Coletivere sent dates when calls were
made by collectors; payments made,
balances due; and action taken, if any.
REVOCABLE
Whenever the bank withdraws or modifies
the credit substituted for the buyer by
using such phrases as “good until
cancelled” or “good until (a certain period
of time), is known as a revocable letter of
credit.
CERTIFIED CHECK
A certified check is originally a personal
check. However, to enhance i acceptability
in case of doubt, bank certification is
required by the recipient of the check. The
check is then brought to the bank and the
bank representative, after checking
depositor ledger and debiting the amount
of the check, stamps the word "Certified"
followed by his signature and the date of
certification across the face of the check.
Thus, when presented for payment even at
a much later date, the bank cannot reject
payment for the reasons of insufficient
funds, forgery and material alterations or
stop payment order, or other defects. This
is so because the check shall have been
considered processed for payment. Drawer
liability is thus taken over by the bank by
virtue of its certification.
STOCK RIGHT
This refers to the pre-emptive right
attached to ownership of a share of stock.
The original stockholder is given the
option to purchase additional shares of
stocks at the new issue price before such
stocks are offered to the public. The
principle underlying this is for the original
owners to maintain their proportionate
control and income in the business. The
issue of additional stocks happens when a
corporation amends its articles of
incorporation to increase its authorized
capital stock.
DRAFT
- are orders to pay and are likewise drawn
against a drawee to pay a third person a
sum certain in money on demand at a
future determinable time. The different
types of drafts are the money order, bank
draft, trade or commercial draft, sight or
demand draft and time draft, which may
either be time date or time sight.
RED-CLAUSE
When the importer has complete
confidence in the exporter, the latter may
be allowed to withdraw funds to purchase
the goods under the terms of an
irrevocable confirmed letter of credit.
However, the beneficiary undertakes to
deliver the shipping documents on or
before the expiration of the date of credit.
INDIVIDUAL MONEY LENDERS
Primitive societies had no need and use for
money. Their members produced what
they consumed and consumed what they
produced. Later on, whatever they could
not produce, they obtained through barter.
But as society became more complex,
barter as a method of exchange became
impractical. Instead, the use of a common
medium of exchange found favor among
its growing number. Briefly, then, the use
of money is a prominent characteristic of
more developed economic societies.
History records that the early use of money
was for consumption. Thus, loans that
were available then were for sumptuary
purposes. Lending money at interest was
frowned upon and forbidden. Expressing
the sentiments of the times, Aristotle, a
leading philosopher, said that money is
barren. Hence, interest ought not to be
charged on money. The demands of trade,
if not to say, the oscillating forces of
capitalism, by and large, accounted for the
practice of lending money at interest.
Individual money lenders in this country
fall under two types: Those who grant
loans as a personal accommodation to
friends and relatives termed Pilipino as
pakikisama or to reciprocate a debt of
gratitude or what is known as “utang na
loob” As such individuals do not charged
interest, for such personal accommodation.
The other type covers those who make the
lending of money and generally charge
and collect exorbitant or usurious rates of
interest a practice aptly a profitable
business. For this reason, being unlicensed
by the government, they generally charged
and collect exorbitant or usurious rates of
interest a practice aptly pictured by
Shakespeare in his book entitled the
“Merchant of Venice”, wherein Shylock,
for failure of Antonio to pay his
obligations, wanted from the latter a pound
of flesh nearest to the heart.
Doubtlessly, the practice of usury in this
country is deeply rooted through the years.
This has literally resulted in the bleeding
to death of the hapless borrowers So
common is this practice that in the words
of a member of a law-investigating body
of the government, usury is “one of the
commonest crimes among our people.”
“Perhaps, it happens more often than does
smuggling or even tax evasion,” he adds It
is so widespread that it does not choose
nor discriminate the places and its victims.
In fact, many a time usury takes place in
the homes, in the offices, in the business
establishments and even in the streets
among neighbors or friends or
“compadres.”
Aware of its existence, the government has
adopted various measures to minimize, if
not totally root out this evil and pernicious
practice made at the expense of small
retailers and consumers. This has resulted
in the formation of the Filipino Retailers
Fund many years back, and the Small
Market Vendors’ Loan recently. Other
measures called for the establishment of
more rural banks in the countryside, as
well as the Savings and Loan Association
and others.
COMMERCIAL LETTER OF
CREDIT
A commercial letter of credit is a written
promise on the part of the bank to honor
drafts drawn against it or for its account,
by a specified beneficiary or his order,
under the specifications contained in the
letter of credit. In effect, the bank is
substituting its credit for that of the
applicants of the letter of credit. This
instrument is used widely in financing
foreign trade
CREDIT POLICY / PRIVILEGE
A bank's credit policy evolves from an
unwritten set of standards, sometimes very
nebulous, to more specific criteria
covering the conditions under which loans
are made. Where a bank is small, such
policies are seldom found in writing.
However, the policy although not
expressed is given meaning and substance
through practice and implementation. As
the bank grows and more bank personnel
are involved in extending credit to
customers, it becomes essential that
appropriate guidelines and standards
should be established in as objective a
manner as possible and expressed in clear
and unmistakable terms.
A policy has been described as a "decision
in advance". Owing to the fact that the
entire range of loan functions of a
commercial bank is basically interwoven
with the decision can result in the
elimination of flexibility and could work
against the interest of the bank. A sound
credit policy with a sufficient degree of
flexibility could help contribute to the
successful operation of commercial banks
insofar as loan functions are concerned.
 Major Function of Credit
NATURE OF CREDIT 1. Maximizing Sales
A credit instrument has two specific 2. Market Competitiveness
characteristics, namely: 3. Cooperation with Other
Department
(1) The presence of risk involved in that 4. Credit Department as a Profit
payment is deferred to a later date, and Center

(2) The debtor- creditor relationship is 4 Scopes of Credit Investigation

stressed. 1. Loan Application
2. Character/Risk Analysis
BASIC ELEMENTS OF CREDIT 3. Cash Flow Preparation Analysis
⁃ Ability to obtain a thing of value 4. Prepare/Finalize CIBI Report
⁃ A promise to pay
⁃ Definite sum of money Classification of Credit Instrument
⁃ Payable on demand or future time ◦ As to Acceptability
◦ As to Form
Financial analysis ◦ As to Function
◦ As to Negotiability
Financial Statements Highlights
- covers the past five years of
operation TRANSACTION ANALYSIS
Compute for the following:
Interpretation of Ratios ◦ Total Asset
⁃ Mental Standards of the Analyst
⁃ Absolute Standards ◦ Total Liabilities
⁃ Past Performance ◦
⁃ Selected Competing Companies ◦ Gross Profit
⁃ Planned or Budgeted Standards
⁃ Industry Average or Median ◦ Net Income

◦ Current Ratio
SOURCES OF CREDIT
INFORMATION
a. Other microfinance institutions ◦ Quick Ratio
b. suppliers
c. co-makers
d. landlords
e. business & residential neighbors ◦ Debt Ratio
f. barangay officials

C’S OF CREDIT
⁃ Character ◦ Equity Ratio
⁃ Capacity
⁃ Capital
⁃ Collateral
⁃ Conditions ◦ Gross Profit Ratio

ENUMERATION
◦ Operating Profit Margin