Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (43448)	6/13/2001 12:33:13 PM
From: StockHawk	Read Replies (2) \| Respond to of 54805

NOPAT and net income The key here is that some items that effect net income (and therefore have a tax consequence) have nothing to do with operations. To get to NOPAT you must recalculate the tax effect yourself. As a quick example, lets say that a company has income of $100,000 from operations, and income from selling stock (or any other non-operating activity) of another $100,000. Total Income is $200,000 and taxes might be $50,000, leaving net profit after tax of $150,000. That $150,000 is not a good number for analyzing operations for two reasons. First because it includes non operating income and secondly because the tax number might be impacted by capital gains rates or perhaps by the effect of loss carryforwards or other adjustments. To get a clearer picture we take the $100,000 from operations and assume a "normal" tax rate of perhaps 35%. That would leave us with a NOPAT of $65,000. NOPAT is an important figure in ROIC calculations (Return on Invested Capital) but that's another story. StockHawk