Why has a profitable company like Clarkson had to borrow so much?

Clarkson Lumber Case --

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Clarkson Lumber Company Income Statements Net Sales Cost of Goods Sold: Beginning Inventory Purchases of Inventory Ending (remaining) Inventory Cost of Goods Sold: Gross Profit Operating Expenses (includes salaries) Earnings before interest and taxes Interest Expense Earnings before taxes Income tax expense Net Income Percent of Sales 1993 $2,921 330 2,209 (337) 2,202 719 (622) 97 (23) 74 (14) $60 2.05% 1994 $3,477 337 2,729 (432) 2,634 843 (717) 126 (42) 84 (16) $68 1.96% 1995 $4,519 432 3,579 (587) 3,424 1,095 (940) 155 (56) 99 (22) $77 1.70% 1st Quarter 1996 $1,062 587 819 (607) 799 263 (244) 19 (13) 6 (1) $5 0.47% 93-95 Percent of Sales 75.7% -20.9% Full Year 1996 Expected $5,500 4,161 $1,339 (1,148) $190 0 190 0 190 3.46% Clarkson Lumber Company Income Statements Net Sales Cost of Goods Sold: Beginning Inventory Purchases of Inventory Ending (remaining) Inventory Cost of Goods Sold: Gross Profit Operating Expenses (includes salaries) Earnings before interest and taxes Interest Expense Earnings before taxes Income tax expense Net Income Percent of Sales 1993 $2,921 330 2,209 (337) 2,202 719 (622) 97 (23) 74 (14) $60 2.05% 1994 $3,477 337 2,729 (432) 2,634 843 (717) 126 (42) 84 (16) $68 1.96% 1995 $4,519 432 3,579 (587) 3,424 1,095 (940) 155 (56) 99 (22) $77 1.70% 1st Quarter 1996 $1,062 587 819 (607) 799 263 (244) 19 (13) 6 (1) $5 0.47% 93-95 Percent of Sales 75.7% -20.9% Full Year 1996 Expected $5,500 4,161 $1,339 (1,148) $190 0 190 0 190 3.46%

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In the Clarkson Lumber case the companys need for borrowing despite being profitable could be attrib... View the full answer