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NOPAT and Net Income

I am looking for a detailed responses in essay form to better understand the subject matter.

A) In your own words, please explain the difference between NOPAT and net income? Which is a better measure of the performance of a firm's operations?

B) In your words, What is free cash flow (FCF)?

I personally know that based on my textbook it is the monetary amount that a firm is able to generate after expenses and other obligations to expand its asset base. Can you elaborate on what I have learned?

I understand without cash in the firm, it is tough to operate and develop new plans, products and expansion. Please elaborate and answer...

Why is free cash flow (FCF) the most important measure of cash flow?

Solution Preview

NOPAT is operating profit less taxes, whereas Net profit is the difference between total revenue and total costs or in other words, net profit is Operating profit+ Non operating income -Non operating expenses. Hence net profit includes all kind of incomes and expenses. On the other hand NOPAT doesn't take care of non operating items. Net Income is affected by special items and items from the discontinued operations. NOI is defined as an above-the-line ...

Solution Summary

Response describes NOPAT and net income

$2.19