NOPAT = Net Income - after-tax Non- |
---|
...
Operating Revenue + after-tax Non- |
---|
...
Operating Expenses + after-tax Interest |
---|
NOPAT provides adjustment to Net Income for:
- 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 doesn’t include one-time losses and other non-recurring charges because they don’t represent 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 | ||
---|---|---|
| ||
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 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
...
Business / Business Administration / Financial Management / Financial Accounting / Profit and Loss (P&L)
[ Net Income ]