NOPAT = Net Income - after-tax Non-Operating Revenue + after-tax Non-Operating Expenses + after-tax Interest |
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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 adjusted for IncomeTaxRate.
Unlike Net Income the NOPAT represents the true, on-going profitability of the Business.
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 proffitability 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 ]