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?
Cupiditate pariatur officia earum nobis est. Est quisquam itaque officiis molestiae maiores aliquid. Facilis ut sit ut vel. Blanditiis et perferendis quas voluptatem voluptatem quaerat.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...