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How would we calculate NOPLAT from an income statement/balance sheet?

a. Operating Income - Taxes
b. Net Income - Dividends
c. Net Operating Profit After Tax (NOPAT)
d. (Net Income - Interest) × (1 - Tax Rate)

User Htw
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1 Answer

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Final answer:

NOPLAT is calculated by subtracting taxes from operating income on a company's income statement. This profitability measure shows earnings from business operations after tax.

Step-by-step explanation:

To calculate Net Operating Profit After Tax (NOPLAT) from an income statement or balance sheet, you would typically subtract taxes from operating income, which can be represented by option a: Operating Income - Taxes. This measure is used to assess the profitability of a business from its core operations, excluding the costs and tax benefits of financing. Here is a simplified calculation:
National income (Y) = $300
Taxes = 0.2 or 20%
Tax amount (T) = $60
To calculate after-tax income, you subtract the tax amount from the national income as follows:
National income minus taxes = $300 - $60 = $240.
Following this method, for a business, you would take the operating income from the income statement and subtract the taxes it owes to arrive at NOPLAT.

User Bidisha Mukherjee
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