Net Operating Profit After Tax - NOPAT


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)


Loading the player...

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.

  1. Shareholder Value Added - SVA

    A value-based performance measure of a company's worth to shareholders. ...
  2. Economic Value Added - EVA

    A measure of a company's financial performance based on the residual ...
  3. After Tax Operating Income - ATOI

    A company's total operating income after taxes. This non-GAAP ...
  4. Value-Added Tax - VAT

    A type of consumption tax that is placed on a product whenever ...
  5. Earnings Stripping

    Earnings Stripping is a commonly-used tactic by multinationals ...
  6. Behavioral Modeling

    Using available and relevant consumer and business spending data ...
Related Articles
  1. Economics

    Explaining Net Operating Profit After Tax

    Net operating profit after tax (NOPAT) describes a company’s potential cash earnings.
  2. Markets

    Understanding Economic Value Added

    Discover the simplicity of this important valuation metric. We reveal its underlying ideas and examine each of its components.
  3. Investing Basics

    How MasterCard Pulled Off a Buyback

    Stock buyback refers to publicly traded companies buying back their shares from shareholders. Why would they do that?
  4. Investing Basics

    The Economics Behind Marathons

    Marathons are growing in popularity at a record pace. Entry into these events commands a hefty price, but it's nothing compared to the organizational costs.
  5. Investing

    Hybrid Business: Rise of Nonprofits in Private Sector

    Businesses are embracing a mutually beneficial partnership wherein the ideals of the nonprofit sector are coupled with profit motive and capacity to scale.
  6. Economics

    Explaining Cost Control

    For a business, cost control entails managing and reducing expenses.
  7. Investing Basics

    What's a Holding Company?

    A holding company is a corporation that owns enough voting stock in another company to control its management and policies.
  8. Economics

    How Does a Credit Facility Work?

    A credit facility is a loan or collection of loans a business or corporation takes to generate capital over an extended period of time.
  9. Professionals

    Are Stock Buybacks Always Good for Shareholders?

    Stock buyback programs aren't always done with the interests of shareholders in mind. It's important to try to understand the motivation behind such moves.
  10. Personal Finance

    6 Websites Where You Can Book a Private Jet

    These sites can help you get the flights and destinations you desire – and sometimes, even just a seat instead of a whole plane.
  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 >>
  4. Why is it beneficial to use Net Operating Profit After Tax to compare companies within ...

    It is beneficial to use net operating profit after tax (NOPAT) to compare companies in the same industry, but with different ... Read Full Answer >>
  5. How can I use Net Operating Profit After Tax (NOPAT) to compare companies and make ...

    Since net operating profit after tax (NOPAT) is used to measure a company's operating income without the effects of capital ... Read Full Answer >>
  6. What are the differences between gross profit and net income?

    When preparing either an income statement or an income tax return for a business, accountants provide calculations for both ... Read Full Answer >>
  7. What is the difference between economic value added and market value added?

    Economic value added (EVA) is a performance measure developed by Stern Stewart & Co that attempts to measure the true ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Flier

    The slang term for a decision to invest in highly speculative investments.
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center