money banking and finacial markets Explain why being a residual claimant makes stock ownership risky

In
relation to stocks, in general, stocks, residual equity claims, are only traded on the stock
market, therefore their residual characteristics do not come into play and therefore do not
materially add to a stock's other risk factors. Only when a business is closing its doors, for
one reason or another, and settling its debts does the residual characteristic of equity
investments become an active risk factor. It is then, when a business is closing, that the total
liabilities must be met before residual equity claims are met: (total assets - total
liabilities) - residual claims.