 Finansial projections play an important role or two important roles in investments. First, financial projections can be used to calculate valuations, and second, financial projections can be used to calculate how large investment the company needs. Let's take a look at how financial projections are calculated. We need to calculate a couple of different projections. But typically, when we start calculating projections, we do a timeline. So we do this kind of plan, kind of like a project plan, where we envision how the company is going to develop in the near future. What are the activities that the company needs to do at different points? What are the milestones? How long it takes to reach those milestones? And this kind of timeline or a plan for the company development gives us then a baseline or foundations on where to calculate the projections. When we calculate projections, we need to project revenues and costs, and the difference, which is the cash flow. We can estimate revenues, which is the hard part using two main techniques. We have the top-down approach and the bottom-up approach. Estimating costs typically comes later once we have estimated revenues, and we need to include the cost of goods sold, how much it costs to actually produce the things that we sell, operating expenses, all other expenses related to the operating of the company, like the CO salary if we have one, and then capital expenditures do we have loans that we need to service, and that kind of things. So how do we calculate the sales forecast or revenue forecast, which is more difficult to do? The top-down approach basically takes the assumption that there will be some kind of market that is accessible for us. For example here, there is the market in North America and market in Europe for the workhorse company from Rinnan Helmens book, and we estimate how is that market going to be developing. So what is the total value, what is the total amount of stuff or euros that people or companies use to buy products in these markets? Then we look at margins. So if there is a reseller or some kind of sales channel, we need to subtract the margin of the sales channel. Here it is estimated to be 50%. And then that gives the value of that market for the producers when you take the middleman out. Then we start to think, okay, so how large market share could our company capture? And if this company captures 11% of the US market share and close to 8% of the European market share, that gives us a projection of the revenues. So you start from the top, you consider what is the total size of that market that we could address, and then how large share of that market could we possibly serve for each year. And that gives us the projections. If we serve a constant 10% market share, then the growth of revenues only depends on market growth. If our market share is growing as well, then the growth of revenues is larger than the growth of the markets. So that's the top-down approach. The bottom-up approach takes another perspective. So it takes more a micro perspective on how much we can produce and how much we can sell. For example, you could consider how many new customers we have now, how much the customers are buying now, how many new customers could we attract every year, could we sell more to existing customers. So you're basically looking at the number of products sold and what's the average sales price or net price that you get from the product, and then you multiply those together and that gives you the revenues. This would be on a product basis. So the previous one, the top-down was market by market, the bottom-up is product by product, and it gives you a prediction of total revenues. Quite often you would do both if possible, and then you would compare the projections and make an informed choice what kind of projections you apply. These projections can be used to also determine the financing needs. For example, if you're projecting that their expenses exceed the costs for the first four years of the company or five years of the company, then we know that this amount of losses here needs to be covered by external investment. To know, to check how much investment we need, we calculate the cumulative losses over time, and it gives us a graph like this. So the losses peak at 2003 after which the company turns profitable here, and we basically need something like two and a half million dollars to cover the early losses. So this gives us the total need for financing. So the projections are important for financing deals because they tell you not only how much financing you need, but also they give you a foundation on calculating valuations using the discounted cash flow method.