Net Operating Profit After Tax - NOPAT

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DEFINITION of 'Net Operating Profit After Tax - NOPAT'

A company's potential cash earnings if its capitalization were unleveraged (that is, if it had no debt). NOPAT is frequently used in economic value added (EVA) calculations.

Calculated as:

NOPAT = Operating Income x (1 - Tax Rate)

BREAKING DOWN 'Net Operating Profit After Tax - NOPAT'

NOPAT is a more accurate look at operating efficiency for leveraged companies. It does not include the tax savings many companies get because they have existing debt.

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RELATED FAQS
  1. How does Net Operating Profit After Tax give a clearer view of the operating efficiency ...

    Net operating profit after tax (NOPAT) gives a clearer view of the operating efficiency of a company. While NOPAT is a measure ... Read Full Answer >>
  2. Why is it beneficial to use Net Operating Profit After Tax as opposed to net income ...

    It is more beneficial to use net operating profit after tax, or NOPAT, as opposed to net income when making an investment ... Read Full Answer >>
  3. Why is it useful for investors to calculate Net Operating Profit After Tax for over-leveraged ...

    It is useful for an investor to calculate net operating profit after tax (NOPAT) for overleveraged companies, because the ... Read Full Answer >>
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    It is beneficial to use net operating profit after tax (NOPAT) to compare companies in the same industry, but with different ... Read Full Answer >>
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