Distinguish between the following: 'Capital structure' and 'financial structure'.

Capital Structure relates to long term capital sources for creation of long term assets. Financial Structure involves creation of long term as well as short term sources of funds. Capital Structure is the core element of financial structure. Capital Structure can exist without the current liabilities and in such cases, capital structure will be equal to financial structure. But we cannot have a situation where the firm has only current liabilities and no long term capital. The financial structure of the firm is considered to be balance 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 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.