Which of the following best describes financial forecasting?

Financial forecasting is primarily concerned with predicting future financial performance based on various analyses, making the choice indicating this definition the most accurate. It involves examining historical data, market trends, and various economic indicators to make informed estimates about future revenues, expenses, and overall financial health. This process aids businesses in strategic planning, budgeting, and decision-making.

The focus of financial forecasting is not merely a review of past transactions, as suggested by one of the other options. While past data can inform forecasts, the essence of forecasting lies in projecting forward rather than solely reflecting back.

Additionally, financial forecasting should not be confused with a yearly profit assessment, which typically focuses on the results of operations over a specific period rather than predicting future performance. Lastly, calculating current cash holdings is more about current liquidity assessment than forecasting future financial activities or results. Therefore, the option that emphasizes prediction and analysis is the most fitting description of financial forecasting.