Rio Imports
Information from the Financial Statements Is Provided in the Following

Rio Imports
Information from the financial statements is provided in the following table:
$\begin{array}{lrr}&\text { Year } 2&\text { Year } 1\\\text { Current liabilities } & \$ 460,000 & \$ 320,000 \\\text { Long-term liabilities } & 240,000 & 640,000 \\\text { Shareholders' equity } & 840,000 & 1,080,000 \\\text { Net cash flows from operating activities } & 160,000 & 102,000 \\\text { Interest and principal payments } & 24,000 & 16,000 \\\text { Net sales } & 950,000 & 900,000 \\\text { Net income } & 180,000 & 144,000 \\\text { Interest expense } & 17,000 & 23,000 \\\text { Income taxes } & 32,000 & 29,000 \\\text { Dividends paid to common shareholders } & 30,000 & 60,000\end{array}$
-Refer to the figure Rio Imports.Which of the following can be said regarding the company's debt management activities?

A) The company has a smaller percentage of capital from shareholders at the end of Year 2 than at the end of Year 1.
B) The company relied more on creditors for financing during Year 2 than during Year 1.
C) The company improved its debt-to-equity ratio in Year 2 over Year 1.
D) The company is in a weaker position at the end of Year 2 to finance capital expenditures from cash flow generated by operating activities.