Net Operating Profit After Tax

Net income (4) Basis for earnings per share calculation/net operating profit after taxes... 

EVA NOPAT - (NOA WACC)1 Profit indicator deducting capital costs from net operating profit after taxes excluding interests consideration of financing structure of the company... 

Net Operating Profit After Tax (NOPAT), Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), and Earnings per Share (EPS), just to give some examples. 

The Stern Stewart firm defines EVA as Net Operating Profit After Tax (NOPAT) less the cost of capital employed in the business. The capital cost can be computed through an analysis of the firm s capital structure, a hurdle rate, or a figure based on the judgment of management. EVA encourages behavior likely to create shareholder wealth. 

Net operating profit less adjusted taxes (NOPLAT), sometimes referred to as net operating profit after tax (NOPAT), is the after-tax operating profit— profit generated from a company s core operations,... 

Free cash flow at every period t (FCFt) is defined by a function that depends on net operating profit after taxes, change in net working capital (NWCt), net change in investments (Netlnvesti) and now advertising expenditures (AdvExpi, ) as well. This can be seen in Eq.(4.7). This equation should replace Eq.(2.51) of Chap. 2. 

Free cash flows at every period t (FCFt) are given by the profit after taxes, net change in investments and change in net working capital. Specifically, fhe free cash flows are the difference between the net operating profit after taxes (NOPAT) and the increase in capital invested. From this definition it follows that there will be value creation if the incoming value Proflt f (1 - trate)) is greater than the consumed value ANWC f ) as shown in Eq.(7.45). Equation (7.46) is applied to compute the profit at each period t and combination of events hi. 

EVA =EconomicValue Added NOPAT = Net operating profit after taxes WACC = Weig hted average cost of capital... 

After-tax cash flow is defined as the net profit after taxes plus the depreciation. This item is an important to management because it is the amount of money available for operating the company. With the advent of accelerated depreciation, the cash flow in the early years of an asset tend to increase, when a plant is being brought on stream and markets are being developed. 

Working capital, which allows a company to carry on day-to-day operations, is determined by subtracting current liabilities from current assets. (See also item 20 in Section 16.3.4.2.) After-tax cashflow is defined as the net profit after taxes plus depreciation. It is essential to have adequate cash flow to operate the company. Earnings per share interests common stockholders and stockbrokers. It is found by dividing the net profit after taxes by the number of shares of common stock. 

Cash flow is the amount of funds available to a company to meet current operating expenses. Cash flow may be expressed on a before- or after-tax basis. After-tax cashflow is defined as the net profit (income) after taxes plus depreciation. It is an integral part of the net present worth (NPW) and discounted cash flow profitability calculations. 

Annual Profits (2007 or the latest fiscal year available to the editors, plus up to four previous years) These are stated in thousands of dollars (add three zeros if you want the full number). This figure represents consolidated, after-tax net profit from all operations. 2007 figures may be estimates or may be for only part of the year—partial year figures are appropriately footnoted. 

Expenses, as outlined in Chap. 8, for various types of taxes and insurance can materially affect the economic situation for any industrial process. Because modem taxes may amount to a major portion of a manufacturing firm s net earnings, it is essential that the chemical engineer be conversant with the fundamentals of taxation. For example, income taxes apply differently to projects with different proportions of fixed and working capital. Profitability, therefore, should be based on income after taxes. Insurance costs, on the other hand, are normally only a small part of the total operational expenditure of an industrial enterprise however, before any operation can be carried out on a sound economic basis, it is necessary to determine the insurance requirements to provide adequate coverage against unpredictable emergencies or developments. 

Estimations of operating costs, income, and taxes indicate that the annual cash flow to the project (i.e., net profit plus depreciation per year) will be 310,000 flowing uniformly throughout the estimated life. This is an after-tax figure. 

The terms can be expressed in different ways, which might create confusion. The annual net profit may be considered before or after tax. Sometimes the net profit in the third year after start-up is used. The invested capital may be referred to the original total capital investment, fixed-capital, depreciated investment, average investment, or something else. The operating costs could include the depreciation in the fixed costs. 

---