What is the difference between a financial distress and a financial crisis?

What is the difference between a financial distress and a financial crisis Introduction Hello everyone, and welcome to our video. Today, we are going to explore a topic that often causes confusion in the financial world: the difference between financial distress and a financial crisis. While these terms may seem similar, they have distinct characteristics and implications. So, let's dive in! Defining Financial Distress Financial distress typically refers to a situation where a company or an individual is facing significant financial challenges. These challenges may include a decline in revenue, an increase in debt, or an inability to meet financial obligations. In essence, it's a state of financial instability, where the entity's financial health is at risk. Understanding Financial Crisis On the other hand, a financial crisis is a more severe and widespread event. It often occurs when there is a systemic failure or disruption in the financial system. A financial crisis can have far-reaching consequences, affecting not just individual entities but also the overall economy. Think of the global financial crisis of 2008, which had a profound impact on economies worldwide. Factors Leading to Financial Distress