Q.State any four tools (techniques) of Financial Statement Analysis.

Determining liquidity and solvency is not a function of fund flow analysis.

Fund flow analysis (a tool of Financial Statement Analysis, TN HSC Commerce) explains the movement of funds — the sources and applications of working capital between two balance-sheet dates. Its genuine functions include helping in financial planning, in the preparation of budgets, and in judging the credit worthiness of a concern.

It does not measure liquidity, because liquidity concerns the ability to meet immediate cash obligations, which is assessed through cash flow analysis and liquidity ratios, not through fund flow. Hence option (b) is not a function of fund flow analysis.

Standard costing is not a tool of financial statement analysis.

The tools used to analyse financial statements (Financial Statement Analysis, TN HSC Commerce) include comparative statements, common-size statements, trend analysis, ratio analysis and fund/cash flow analysis. Standard costing, on the other hand, is a technique of cost accounting used to set standards and control costs by comparing them with actuals — it is not a method of analysing published financial statements. Hence it is the odd option here.

Standard costing is not a tool of financial statement analysis — option (c).

The main tools used to analyse and interpret financial statements are:

• Comparative statements — figures of two or more periods placed side by side.
• Common-size statements — each item expressed as a percentage of a common base (sales or total assets).
• Trend analysis — figures of several years expressed as an index over a base year.
• (Also ratio analysis, cash-flow and fund-flow analysis.)

Standard costing is a technique of cost control that sets predetermined costs and analyses variances; it belongs to cost accounting, not to the analysis of published financial statements. Hence it is the odd one out.

In financial-statement/fund flow analysis, 'fund' means Working Capital (current assets − current liabilities).

The term 'fund' has several meanings, but in the context of analysing the flow of resources it is used in its narrow technical sense:

• Fund = Working Capital = Current Assets − Current Liabilities.
• It is not fixed assets, current liabilities alone, or non-current assets.

So any transaction that changes working capital is treated as a 'flow of funds'. This meaning is the one adopted in the Tamil Nadu HSC Class-12 Accountancy topic on tools of financial statement analysis.