Free cash flow to firm - Net debt

So I am a bit confused about when we calculate free cash flow to the firm, why do we not include net debt borrowings? For example, if firm ABC in Y1 has CFO = $1M, Capex = $500k and Net debt borrowings of $2M, then do they not have 1-0.5+2 = $2.5M in free cash flows to use between debt and equity holders for that year? I understand that they need to repay this money eventually, to the debt holders themselves, but for that year, why is it not free cash flow? Why when we calculate FCFE it is included as FCF?

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Class of '25 Nov 2026 Cohort

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