NOPLAT

NOPLAT stands for Net Operating Profit Less Adjusted Taxes. NOPLAT calculation formula is structurally similar to the one for calculating net income; however, instead of EBT (pre-tax profit), it used EBIT (earnings before interest and taxes which is also called operating income).

NOPLAT = EBIT * (1 - T),

where T is effective corporate tax rate.

Like EBIT, NOPLAT removes the effects of corporate capital structure (or leverage), but unlike EBIT, it takes into account corporate tax optimization system. By using operating income, or income before taking interest payments into account, NOPLAT is a better indicator of operating efficiency than net income, for example.

NOPLAT is used extensively in mergers and acquisitions as an input in creating discounted cash flow valuation models.