Net Operating Profit Less Adjusted Taxes (NOPLAT)

Net operating profit less adjusted taxes (NOPLAT) is a measure of a company's profitability that excludes non-operating income and expenses. It is calculated by taking a company's net operating profit (NOPAT) and subtracting its adjusted taxes. NOPAT is calculated by taking a company's net income and adding back interest, taxes, depreciation, and amortization (EBITDA). Adjusted taxes are the taxes that a company would have paid if it had no non-operating income or expenses.

NOPLAT is a useful measure of a company's profitability because it focuses on the company's core business operations. It excludes non-operating income and expenses, which can be volatile and can distort a company's true profitability. NOPLAT is also a good measure of a company's ability to generate cash flow, as it excludes non-cash expenses such as depreciation and amortization.

There are a few limitations to using NOPLAT. First, NOPLAT does not take into account a company's capital structure. A company with a lot of debt will have higher interest expenses, which will reduce its NOPLAT. Second, NOPLAT does not take into account a company's investment in working capital. A company with a lot of inventory or accounts receivable will have higher working capital requirements, which will reduce its NOPLAT.

Despite these limitations, NOPLAT is a useful measure of a company's profitability. It is a good way to compare companies with different capital structures and investment requirements. NOPLAT can also be used to evaluate a company's ability to generate cash flow.

Here is a more detailed explanation of how NOPLAT is calculated:

NOPLAT = NOPAT - Adjusted Taxes

NOPAT = Net Income + Interest + Taxes + Depreciation + Amortization

Adjusted Taxes = Taxes that a company would have paid if it had no non-operating income or expenses

NOPLAT is a useful measure of a company's profitability because it focuses on the company's core business operations. It excludes non-operating income and expenses, which can be volatile and can distort a company's true profitability. NOPLAT is also a good measure of a company's ability to generate cash flow, as it excludes non-cash expenses such as depreciation and amortization.