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)

INVESTOPEDIA EXPLAINS'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 >>
  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 >>

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