Quick Finance Tip - NOPAT (Net Operating Profit After Tax)

NOPAT is the company's potential cash earnings, it it had no debt. Therefore, NOPAT will equal:
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• Net operating profit after tax - Net operating profit before tax = Tax on operating profit; or 
• NOPAT = Operating Income x (1 - Tax Rate) 

Tax on operating profit is the sum of your tax shield and tax expense. the tax shield = Tax expense + (Pretax net non-operating expense * Statutory tax rate). The taxes saved by the tax shield do not relate to operating profits, and in consequence, the user must add back the tax shield to total tax expense.