Net operating profit after taxes (NOPAT) tells you a company's profit assume the company had zero debt. NOPAT is also called unlevered net income, taxeffected EBIT, and EBIAT (earnings before interest after taxes).

NOPAT is helpful because it allows you to compare the core operating profit after taxes for two companies independent of their financing structure. Unlike net income, NOPAT isn't affect by interest expense.

Here are two formulas for calculating NOPAT:

NOPAT = EBIT x (1 tax rate)

NOPAT = net income + (interest expense + nonoperating losses nonoperating gains)(1 tax rate)

NOPAT can be used to calculate free cash flow and it is often used to calculate a company's return on invested capital (ROIC).
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