Which of the following best describes financial forecasting?

Financial forecasting is best described as a prediction of future financial performance because it involves estimating future revenues, expenses, and other financial metrics based on historical data, trends, and various assumptions. This predictive process is crucial for businesses to plan their financial strategies, allocate resources effectively, and set realistic goals. It helps management make informed decisions regarding investments, expansions, and budgeting initiatives by anticipating how financial variables will change over time.

The other options involve different aspects of financial management. A review of past financial statements focuses on analyzing historical data rather than predicting future performance. A current budget analysis looks at the present budget compared to actual performance, which does not provide forward-looking estimates. Calculating taxes owed is a specific task related to compliance and does not encompass the broader scope of forecasting future financial outcomes.