In recent times, especially referring to the economic and financial crisis that has become evident, we have heard and read in the news on many occasions the concepts of economic and financial situation. However, at first these concepts may seem confusing and very similar, but they are not. In this article we will explain the difference between economic and financial situation.
Definition of economic and financial situation
The concept of economic situation refers to the assets of the person, company or society as a whole, that is, to the amount of goods and assets that they own and that belong to them.
Meanwhile, the financial situation refers to the ability of those people, companies or society to be able to deal with the debts they have or, what is the same, the liquidity they have to pay their debts.
Therefore, someone can have a good economic and bad financial situation, if they do not have enough cash to pay their debts. As well as good financial if you have cash, but bad financially if these debts exceed your total assets.
Difference between economic situation and financial situation
The main differences between economic situation and financial situation that we can highlight are:
- The economic situation is measured by the total assets.
- Financial status is measured by your ability to cope with your debts.
- Although the two are closely related, they do not have to go in the same direction.
- To have a good economic situation, it is important that our assets are not compromised by debts.
To have a good financial situation, it is necessary to have no debts or to have enough cash to pay them without problems.