NOPLAT
Encyclopedia
Investopedia definition
NOPLAT = Net Operating Profit Less Adjusted Taxes.
It means Total operating profits for a firm with adjustments made for taxes. It represents the profits generated from a company's core operations after subtracting the income taxes related to the core operations. NOPLAT is often used as an input in creating discounted cash flow valuation models.
Used in preference to Net Income
as it removes the effects of capital structure (debt vs. equity). The Operating Profit is prior to interest and taxes being subtracted, which makes NOPLAT equal NOPAT
.
NOPLAT minus the monetary cost of all capital (both equity and debt) equals EVA
.
Though an analyst should make thorough adjustments to account for amortization, intertemporal tax differences, taxes on nonoperating income, and other adjustments, sometimes the following simple back-of-the-envelope formula is employed to show de-levered profits by removing the effects of a debt tax shield
:
Operating earnings = After-tax operating profit + (Interest paid * (1 - tax rate))
NOPLAT = Net Operating Profit Less Adjusted Taxes.
It means Total operating profits for a firm with adjustments made for taxes. It represents the profits generated from a company's core operations after subtracting the income taxes related to the core operations. NOPLAT is often used as an input in creating discounted cash flow valuation models.
Used in preference to Net Income
Net income
Net income is the residual income of a firm after adding total revenue and gains and subtracting all expenses and losses for the reporting period. Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings...
as it removes the effects of capital structure (debt vs. equity). The Operating Profit is prior to interest and taxes being subtracted, which makes NOPLAT equal NOPAT
NOPAT
In corporate finance, net operating profit after tax or NOPAT is a company's after-tax operating profit for all investors, including shareholders and debt holders. It is equal to NOPLAT and is defined as follows:An alternative formula is as follows...
.
NOPLAT minus the monetary cost of all capital (both equity and debt) equals EVA
Economic value added
In corporate finance, Economic Value Added or EVA, a registered trademark of Stern Stewart & Co., is an estimate of a firm's economic profit – being the value created in excess of the required return of the company's investors . Quite simply, EVA is the profit earned by the firm less the cost of...
.
Though an analyst should make thorough adjustments to account for amortization, intertemporal tax differences, taxes on nonoperating income, and other adjustments, sometimes the following simple back-of-the-envelope formula is employed to show de-levered profits by removing the effects of a debt tax shield
Tax shield
A tax shield is the reduction in income taxes that results from taking an allowable deduction from taxable income. For example, because interest on debt is a tax-deductible expense, taking on debt creates a tax shield...
:
Operating earnings = After-tax operating profit + (Interest paid * (1 - tax rate))