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- Non-Operating Revenue – because it does not represent the primary Business gains
- Non-Operating Expense – because it does not represent the primary Business expenses
- Interest – because there is a flexibility in the way Business finance its activity
with all above being adjusted for IncomeTaxRate.
Unlike Net Income the NOPAT represents the true, on-going profitability of the Business.
If Business is strictly primary (with no Non-Operating Revenue and Non-Operating Expense) and does not use external financing then NOPAT = Net Income.
| Expand | ||
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For example, a company may incur acquisition costs that would not be expected to occur in the future. These costs would negatively effect current year earnings, but do not accurately portray the regular |
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profitability of the Business. These costs should be excluded when performing any type of analysis to determine the operating and financial efficiency of a Business or to compare performance against other Businesses. |
See also
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Business / Business Administration / Financial Management / Financial Accounting / Profit and Loss (P&L)
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