Net Operating Profit After Tax (NOPAT)
Date created: Oct 12, 2022 • Last updated: Oct 12, 2022
What is Net Operating Profit After Tax?
Net Operating Profit After Tax (NOPAT) is a financial performance metric that calculates profit gained through core operations after taxes. This metric is used to measure operating efficiency without the impact of debt, because the calculation does not take tax benefits from debt into consideration. In other words, if a company has no debt, their NOPAT and net income after tax would be identical.
Net Operating Profit After Tax Formula
How to calculate Net Operating Profit After Tax
If operating income is $100,000 and the tax rate is 30%, then NOPAT is $100,000 * (1 - 30%) or $100,000 * .7, which is $70,000.
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How to visualize Net Operating Profit After Tax?
Typically, you would view your NOPAT on the balance sheet. If you decide to track this number on a dashboard, you should take a similar approach and display your NOPAT as a dollar amount in either a table or a summary chart. Take a look at the example:
Net Operating Profit After Tax visualization example
Summary Chart
Net Operating Profit After Tax
Chart
Measuring Net Operating Profit After TaxMore about Net Operating Profit After Tax
NOPAT is a useful metric to determine operating efficiency of core business operations without the impact of debt. This is useful when trying to calculate free cash flow to the firm, mainly used to consider mergers or acquisitions. By looking at earnings as though capital is unleveraged, you obtain a pure measure of operating efficiency.
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Use Klipfolio PowerMetrics, our free analytics tool, to monitor your data.
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