Net Operating Profit after Tax (redirected from NOPAT)

Net Operating Profit After Tax

A company's operating profit after subtracting its tax liability. It is calculated as follows:

NOPAT = Operating Profit * (1 - tax rate)

Because operating profit does not deduct interest expenses, NOPAT shows what a company's net profit would have been if it were debt free. As such, it may provide a more accurate description of a company's efficiency of operations for highly leveraged companies.

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Net Operating Profit after Tax (NOPAT)

What Does Net Operating Profit after Tax (NOPAT) Mean?

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

NOPAT = Operating Income × (1 - Tax Rate)

Investopedia explains Net Operating Profit after Tax (NOPAT) NOPAT constitutes 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.

Related Terms:
• Accrual Accounting
• Balance Sheet
• Diluted Earnings per Share
• Operating Expense
• Profit