What is 'Net Operating Profit Less Adjusted Taxes - NOPLAT'
Net operating profit less adjusted taxes (NOPLAT) is a financial metric that calculates a firm's operating profits after adjusting for taxes. By using operating income, or income before taking interest payments into account, NOPLAT is a better indicator of operating efficiency than net income, for example. NOPLAT is used extensively in mergers and acquisitions because it enables the calculation of an investment's free cash flow.
BREAKING DOWN 'Net Operating Profit Less Adjusted Taxes - NOPLAT'
NOPLAT for a firm is calculated as Operating Income x (1 - Tax Rate). For example, a firm with $250,000 in operating income and a tax rate of 30% would have NOPLAT of $175,000. NOPLAT is also used to calculate Economic Value Added or EVA: a measure of management performance to compare economic profit to the total cost of capital.