Net operating profit after tax (NOPAT) measures the operating profit made for all investors, both shareholders and debt holders. It (with various adjustments) is often used in EVA models.

The justification for this is that a company creates wealth for shareholders by providing returns that are greater than the cost of capital. Therefore the management should focus on the actual returns to investors. This is the sum of the returns to shareholders and debt holders; the profit generated for shareholders plus the interest paid on debt. This is the same as the operating profit less tax with certain adjustments. Hence the term NOPAT.

The adjustments made may include: removing the effects of goodwill and other non-cash items, treating R & D expenditure as an investment (rather than a current expenditure) and treating operating lease rentals as interest.

A serious weakness of NOPAT is that it is distorted by the different tax treatment of debt and equity. The returns to debt and equity holders are calculated after tax, but the level of debt affects the level of tax and this is not corrected.

NOPAT is usually used internally as a target for company's management, rather than externally as a valuation measure by investors.