NOPAT is Net Operating Profit After Tax. It shows a firmβs after-tax profits from day-to-day business operations. Analysts use the formula to compare business performance to past years, and to assess how a company is performing against its competitors.
This article uses anΒ income statementΒ to explain NOPAT, and to point out how the calculation differs from net income, EBIT, and other balances. Youβll learn how to calculate NOPAT, and how the formula can be used to make better decisions from financialΒ reporting insights.
As an example throughout, meet Patty, the owner of Seaside Furniture, a manufacturing company. Here is Seasideβs 2020 income statement: