NOPAT
What is NOPAT?
Net operating profit after tax (more commonly known as NOPAT) is the calculation of a company’s profit if the costs and tax benefits of that company’s debts are not taken into account. This is often used as part of an economic value added (EVA) calculation.
Where have you heard about NOPAT?
Most companies and many investors will have some knowledge of their net operating profit after tax, especially if they have outstanding debts. This is because it is a very effective way of examining the efficiency of operations of a leveraged company.
What you need to know about NOPAT...
Many investors will seek to find out a business’s net operating profit before tax when they are deciding whether or not to invest. NOPAT gives analysts and investors the clearest picture of a company’s health and its ability to create profit, without clouding these details with the loans and debt payments that could eventually be paid off. This is opposed to analysis of sales, which, despite giving a good indication of performance, does not fully examine efficiency. If a company does not have debt, their net operating profit after tax will equal the same amount as their net income after tax.
Find out more about NOPAT...
To learn more about NOPAT, read our page on economic value added calculations.
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