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Financial Structure refers to the balance between all of the company’s liabilities and its equities. It thus concerns the entire “Liabilities + Equities” side of the balance sheet.
Capital structure, by contrast, includes equities and only the long term liabilities. It refers to the makeup of the company’s underlying value, in particular the relative balance between funding from equities and funding from long term debt. The presumption is that funds from both sources are used for acquiring income-producing assets. Capital structure is also known as capitalization.
For comparing company debt to equities, financial structure is therefore more sensitive than capital structure to factors reflected in short term liabilities, such as salaries payable, account payable, and taxes payable.
Good question.
Ideally all liabilities should have been included while calculating debt/equit ratios, but the sole reason of exclusion of current liabilities from the total debt is that there are no fixed payments or interest expenses associated with non-current operational liabilities.
In short only those liabilities shall be included which requires cash outflow in the form of interest or fixed payments. Current portion of long term liabilities included in current liabilities shall also be considered for this purpose.
