Net Profit After Tax (NPAT) is a comprehensive measure of a company's profitability. It is calculated by taking the total revenues generated by the company during a specific period and subtracting all expenses, which include cost of goods sold (COGS), operating expenses, interest, and taxes. This financial metric provides insights into how efficiently a company conducts its operations and manages its expenses to produce profits after fulfilling its tax obligations.
For example, if a company has $1,000,000 in revenue, $650,000 in total operating costs, and an additional $200,000 in taxes, its NPAT would be $1,000,000 - $650,000 - $200,000 = $150,000. NPAT is a key figure in financial statements and is often used by investors and analysts to gauge the financial health of a business. A growing NPAT over sequential periods indicates consistent financial growth.
Understanding NPAT allows stakeholders to assess the bottom-line profitability of the business, beyond merely the revenue or gross profit figures. It is distinct from operating profit, which does not account for taxes and interest, focusing instead exclusively on operational results. Related terms include Gross Profit and Net Income.