Noplat MBA

I want some information about Net Operating Profit After Tax (NOPAT) MBA Finance, Accounting and Economics Terms for that will you please help me here?

[Pathak]

I will help you here to get the information about Net Operating Profit After Tax (NOPAT) MBA Finance, Accounting and Economics Terms so that you can have idea about it.

Definition
In corporate finance, a company’s net-operating-profit-after-tax is its after tax earnings from operations and is the same as EBIAT (Earnings Before Interest and After Tax). The formula for calculating NOPAT is:-

NOPAT = EBIT(1-t)

In case the company is unlevered i.e. free from any kind of debt, then the NOPAT is the same as PAT as there is no interest expense to be deducted from EBIT such that EBIT =EBT.

Therefore, NOPAT gives a better measure of operational efficiency for leveraged companies as it does not consider the tax savings.

Example which you can understand easily
Here is a hypothetical example:

Sales Revenue : Rs. 100,000
CAGS : Rs. 30,000

Gross Margin : Rs. 70,000
Operating Expenses : Rs. 15,000

Operating Profit (EBIT) : Rs. 55,000
Tax Expenses (EBIT x t) : Rs. 20,000
(t=40%)
NOPAT :Rs. 35,000