In corporate finance, net operating profit after tax (NOPAT) is a company's after-tax operating profit for all investors, including shareholders and debt holders.[1] NOPAT is used by analysts and investors as a precise and accurate measurement of profitability to compare a company's financial results across its history and against competitors.[2]
When calculating NOPAT, one removes Interest Expense and the effects of other non-operating activities (non-recurring gains and losses) from Net Income to arrive at a value that approximates the value of a firm's annual earnings. NOPAT is precisely calculated as:
NOPAT doesn't include one-time losses and other non-recurring charges, because they don't represent the true, ongoing profitability of the business.[2] For example, a company may incur acquisition costs that would not be expected to occur in the future. These costs would negatively affect current year earnings, but do not accurately portray the operations of the firm. These costs should be excluded when performing any type of analysis to determine the operating and financial efficiency of a firm or to compare performance against other firms.
For a rough calculation, NOPAT approximates earnings before interest after taxes (EBIAT).[4]
The rough calculation for NOPAT is: NOPAT = Operating profit x (1 - Tax Rate)
NOPAT is frequently used in calculations of Economic value added and Free cash flow.[1][4][2]
^ abMoneyterms.co.uk. NOPAT
^ abc"Education – Metrics – NOPAT". New Constructs. Retrieved 2021-10-13.
^Holland, David A.; Matthews, Bryant A. (2017-12-11). Beyond Earnings: Applying the HOLT CFROI and Economic Profit Framework. John Wiley & Sons. ISBN 978-1-119-44048-2.
^ abinvestopedia.com. NOPAT
and 25 Related for: Net operating profit after taxes information
ratio of operating income ("operatingprofit" in the UK) to net sales, usually expressed in percent. Operating margin = Operating income Revenue . {\displaystyle...
are made, depending on the company and its industry. EVA is netoperatingprofitaftertaxes (or NOPAT) less a capital charge, the latter being the product...
{\displaystyle FCF_{t}=OCB_{t}-I_{t}\,} where OCBt is the firm's netoperatingprofitaftertaxes (NOPAT) during period t It is the firm's investment during...
operations, this yields income before taxes. The final step is to deduct taxes, which finally produces the net income for the period measured. Income...
within each country's tax system. Such taxes may include income or other taxes. The tax systems of most countries impose an income tax at the entity level...
wealth taxes can reduce income inequality by making it harder for individuals to accumulate large amounts of wealth. Many critics of wealth taxes claim...
Alternative Minimum Tax was eliminated in 2018. Corporations may also be subject to additional taxes in certain circumstances. These include taxes on excess accumulated...
investment savings accounts. Capital gains taxes are payable on most valuable items or assets sold at a profit. Antiques, shares, precious metals and second...
shifting profits offshore (and paying between 0-3 percent on their offshore profits and then being taxed at the GILTI 10.5 percent rate net of any taxes paid...
are within the law. A tax shelter is one type of tax avoidance, and tax havens are jurisdictions that facilitate reduced taxes. Tax avoidance should not...
corporate tax havens, whose BEPS tools were responsible for most of the lost taxes, led to criticism of this approach, versus actual taxes paid. Higher-tax jurisdictions...
Total Equity}}}} Where Net Income = pre-tax income aftertaxes Equity = shareholders' equity EBIT = Earnings before interest and taxes Pretax Income is often...
statement: Cash flow from operating activities - a measure of the cash generated by a company's regular business operations. Operating cash flow indicates whether...
from its operatingprofit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".) Formula = NetOperatingProfitAfterTaxes (NOPAT)...
margin analysis is a measure of operating leverage; it measures how growth in sales translates to growth in profits. The contribution margin is computed...
plus the present value of the tax savings due to the tax deductibility of interest payments, the so-called value of the tax shield (VTS). Myers proposes...
sterling. Corporation tax in the United Kingdom is a corporate tax levied in on the profits made by UK-resident companies and on the profits of entities registered...
the tax. The aim is to reduce tax competition between countries and discourage multinational corporations (MNC) from profit shifting that avoids taxes. On...
Global Information