NOPAT (Net Operating Profit After Tax)

Definition: NOPAT (Net Operating Profit After Tax) is a company's potential cash earnings if its capitalization were unleveraged — that is, if it had no debt. …

NOPAT (Net Operating Profit After Tax) is a company's potential cash earnings if its capitalization were unleveraged — that is, if it had no debt. NOPAT = EBIT × (1 − Tax Rate). Because it removes the effects of capital structure and the tax shield from interest, NOPAT enables apples-to-apples comparison of operating performance across firms with different debt levels. NOPAT is the numerator of Return on Invested Capital (ROIC = NOPAT / Invested Capital) and is the cash-flow basis for Economic Value Added (EVA).