Stock to Surplus Ratio

CFA Level III
#1

In the 5th Schweser AM practice test, the given answer to question 7 includes how the stock to surplus ratio assists in assigning a low risk tolerance. Can someone please explain how stock to surplus affects the risk tolerance? Many thanks!

#2

I had the same question when I did that mock, here is the answer. Hope it helps. The lower the ratio the better, that’s how I understood it. stock/surplus, so higher denominator, lower ratio, more cushion, higher ability to take risk. https://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/91351473

#3

Thanks for the help. That makes sense.

#4

Thanks for the help. That makes sense.