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David Trainer
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David is CEO of New Constructs (www.newconstructs.com), an independent research that specializes in unearthing key insights from the Financial Footnotes of Annual Reports. Having analyzed over 50,000 annual reports and their Financial Footnotes, New Constructs research regularly produces Hidden... More
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The Valuation Handbook
  • NOPAT: Definition And Formulae For Net Operating Profit After-Tax And NOPAT Margin 0 comments
    Oct 2, 2012 12:40 PM

    NOPAT is the after-tax operating cash generated by the business, excluding unusual losses and gains, financing costs, goodwill and other non-cash items. It can be calculated two mathematically equivalent ways:

    Figure 1: Formulae for NOPAT

    Source: New Constructs, LLC

    Below are the primary accounting distortions in reported financial statements that require economic translation and adjustment for the NOPAT calculation.

    1. Hidden unusual items from the MD&A and footnotes
    2. Unusual items found on the income statement and statement of cash flows
    3. Non-operating and unusual taxes
    4. Off-balance sheet debt
    5. Income from Unconsolidated Subsidiaries
    6. Minority Interests
    7. Restructuring/non-recurring charges
    8. All Non-operating Items below EBIT
    9. All After-tax Items
    10. Unusual items hidden in pension expenses
    11. Abnormal assumptions that affect stock option and pension expenses
    12. Contact us to learn more.

    NOPAT Margin is equal to NOPAT/Total Operating Revenues.

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