Difference between economic situation and financial situation

In recent times, especially referring to the economic and financial crisis that has become apparent, 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 it is not so. In this Uncommon article we will explain the difference between economic situation and financial situation.

Definition of economic situation 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 assets and assets that they own and that belong to them.

Meanwhile, the financial situation refers to the ability of these people, companies or society to cope 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 situation and a bad financial one, 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.
  • The financial situation is measured by the ability to deal with your debts.
  • Although both 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 not to have debts or have enough cash to pay them without problems.

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