NOPAT

(noun)

NOPAT (net operating profit after tax) is profits derived from a company's operations after cash taxes but before financing costs and non-cash bookkeeping entries. It is the total pool of profits available to provide a cash return to those who provide capital to the firm.

Examples of NOPAT in the following topics:

  • MVA and EVA

    • EVA is net operating profit after taxes (or NOPAT) less a capital charge, the latter being the product of the cost of capital and the economic capital.
    • The basic formula is: EVA = (r - c) * K = NOPAT - c * K
    • where r is the return on investment capital (ROIC); c is the weighted average of cost of capital (WACC); K is the economic capital employed; NOPAT is the net operating profit after tax.
  • Using Financial Statements to Understand a Business

    • Normal earnings are also separated into net operational profit after taxes (NOPAT) and net financial costs.
Subjects
  • Accounting
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