What Does Net Operating Profit After Tax - NOPAT Mean?

A company's potential cash earnings if its capitalization were unleveraged (that is, if it had no debt). NOPAT is frequently used in economic value added (EVA) calculations. Calculated as: NOPAT = Operating Income x (1 - Tax Rate)

Investopedia explains Net Operating Profit After Tax - NOPAT NOPAT is a more accurate look at operating efficiency for leveraged companies. It does not include the tax savings many companies get because they have existing debt. Read more: http://www.investopedia.com/terms/n/nopat.asp#ixzz1cZtpgdWj

What Does Economic Value Added - EVA Mean? A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".) The formula for calculating EVA is as follows: = Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)

Investopedia explains Economic Value Added - EVA This measure was devised by Stern Stewart & Co. Economic value added attempts to capture the true economic profit of a company. Read more: http://www.investopedia.com/terms/e/eva.asp#ixzz1cZuxYnMv
The Calculation There are four steps in the calculation of EVA: 1. Calculate Net Operating Profit After Tax (NOPAT) 2. Calculate Total Invested Capital (TC) 3. Determine a Cost of Capital (WACC) 4. Calculate EVA = NOPAT WACC% * (TC)

Read more: http://www.investopedia.com/articles/fundamental/03/031203.asp#ixzz1cZwbljZe

In corporate finance, net operating profit after tax or NOPAT is a company's after-tax operating profit for all investors, including shareholders and debt holders.[1] It is equal to NOPLAT and is defined as follows[2]:

NOPAT = Operating profit x (1 - Tax Rate)

An alternative formula is as follows[3]

NOPAT = Net Profit After Tax + after tax Interest Expense after tax Interest Income

For companies with no debt and thus no interest expense, NOPAT is equal to net profit. In other words, NOPAT represents the company's operating profit that would accrue to shareholders (after taxes) if the company had no debt.[2] Another fully equivalent expression is
NOPAT = AdjEBIT - CashOpTax

where:
AdjEBIT represents adjusted earnings before interest and taxes (adjusted EBIT) CashOpTax represents cash operating taxes.

or
NOPAT = (1-Tax Rate)* EBIT

NOPAT is frequently used in calculations of Economic value added and Free cash flow.[1][2]

Instructions
1.
o

Find earnings before interest and taxes (EBIT). Find net income and add back interest and income tax expense. The goal here is to calculate a "de-levered" net income amount. You want the income that goes to all holders of capital in the company, including creditors.

Calculate key adjustments to convert from accrual to cash basis accounting. There are many accounting conventions based on non-cash events such as depreciation. Depreciation is an expense, but it is not an outlay of cash. As such, it is added back to net income in order to arrive at a cash basis of income. Add back anything that does not represent a real cash

outflow. This will depend on the company, but examples include LIFO Reserve or Allowance for Bad Debt.

Determine capitalized investments. Capitalization refers to turning an expense into an investment. For instance, long term leases can be capitalized over the life of the lease and therefore moved to the balance sheet. Adding back any interest on operating leases is usually the largest component of this adjustment.

Take EBIT and add back adjustments for accrual based accounting and allocations for capitalized investments. This is a "cleaned" EBIT number that should represent real cash movements.

Subtract cash from operating taxes. There is a difference between the amount companies report paying for taxes and the amount they actually pay for taxes. This difference is due to accrual accounting. Not all public companies report this number, but if they do it can be found in the notes to the income statement in the 10K.

Read more: How to Calculate NOPAT | eHow.com http://www.ehow.com/how_5057141_calculate-nopat.html#ixzz1cZz3hb00

Return On Invested Capital - ROIC

What Does Return On Invested Capital - ROIC Mean? A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. The return on invested capital measure gives a sense of how well a company is using its money to generate returns. Comparing a company's return on capital (ROIC) with its cost of capital (WACC) reveals whether invested capital was used effectively. The general equation for ROIC is as follows:

Also known as "return on capital"

Investopedia explains Return On Invested Capital - ROIC Total capital includes long-term debt, and common and preferred shares. Because some companies receive income from other sources or have other conflicting items in their net income, net operating profit after tax (NOPAT) may be used instead. ROIC is always calculated as a percentage. Invested capital can be in buildings, projects, machinery, other companies etc. One downside of return on capital is that it tells nothing about where the return is being generated. For example, it does not specify whether it is from continuing operations or from a onetime event, such as a gain from foreign currency transactions.

Read more: http://www.investopedia.com/terms/r/returnoninvestmentcapital.asp#ixzz1cZzMVAWK

When analyzing a stock, one of the key measures of a company's performance is its Return on Equity or ROE. The magnitude of this number can give you insight into the company's operating performance and help you evaluate whether or not the company's stock makes a good investment. A higher ROE usually indicates that a company is performing well, while a lower ROE usually indicates that it could be doing better. Here's how to calculate ROE.

Difficulty: Moderately Easy

Instructions
Things You'll Need

The company's financial statements, which you can usually find on the company's website, or Edgar. The SEC filings containing the financial information are 10Ks and 10Qs. A calculator

1.
o

Locate the Balance Sheet or Statement of Shareholders' Equity. After you have done so, identify the common shareholders' equity for the current year (lets call it CSE1) and the common shareholders' equity for the previous year (CSE2).

Calculate the average common shareholders' equity (CSE Avg) for the most recent year and the previous year by using this formula: CSEavg = (CSE1 + CSE2)/2

Locate the net income (NI) for the year in which you want to calculate ROE. This can be found near the bottom of the income statement for the most recent year.

Finally, calculate the ROE: ROE = NI/CSEavg This gives you your final answer which is the ROE of the company you are analyzing.

Read more: How to Calculate Return on Equity (ROE) | eHow.com http://www.ehow.com/how_2003088_calculate-return-on-equity-roe.html#ixzz1ca2fR4Ka