NOPLAT

The Net Operating Profit Less Adjusted Taxes ( NOPLAT, to German business profit less adjusted taxes, as Earnings Before Interest, called EBI ) is a business management code, which denotes the adjusted for taxes paid operating profit.

Background

The NOPLAT is very similar to the net operating profit after taxes (NOPAT ), which denotes the adjusted notional tax operating profit of a company. If there are no borrowing costs both ratios are equal. As to borrowing costs, however, no tax is payable, the taxes paid are less than the calculated fictitious. One also speaks of the determination of deferred taxes.

Calculation

NOPLAT = EBIT - ( Adapted ) taxes on operating profit

This definition is either not correct or is used differently. The book "Valuation" ( University Edition, Tim Koller, ..., McKinsey & Company ) NOPLAT for example, defined as follows:

NOPLAT = EBITDA - ( Adapted ) taxes on operating profit

Only in this way also the following relationships are evident:

FCF = NOPLAT - Net Investment and ROIC = NOPLAT / Invested Capital

(FCF = Free Operating Cash Flow, ROIC Return On Invested Capital)

Because both FCF as well as ROIC based on cash flow analysis. That starting from the EBIT, which includes the non- cash losses related to depreciation = Depreciation and Amortization (DA), any adjustment must be in by adding DA to the cash flow calculation:

NOPLAT = EBIT Depreciation / Amortization - ( Adapted ) Taxes on operating income => NOPLAT = EBITDA - ( Adapted ) taxes on operating profit