Distinguish between the following: Financial Structure and Capital Structure

Difference between Financial Structure and Capital Structure Capital structure relates to long term capital deployment for creation of long term assets. Financial structure involves creation of both long term and short term assets. Capital structure is the core element of the financial structure. Capital structure can exist without the current liabilities and in such cases; Capital structure shall be equal to the financial structure. But we cannot have a situation where the firm has only current liabilities and no long term capital. The financial structure of a firm is considered to be a balanced one if the amount of current liabilities is less than the capital structure net of outside debt, because in such cases, the long term capital is considered sufficient to pay current liabilities in case of sudden loss of current assets. Components of the capital structure may be used to build up the level of current assets but the current liabilities should not be used to finance acquisition of fixed assets. This would result in an asset liability mismatch.