This PPT slide, part of the 54-slide Value Creation Framework PowerPoint presentation, presents a dual methodology for calculating NOPLAT (Net Operating Profit Less Adjusted Taxes), emphasizing 2 distinct approaches: top down and bottom up.

In the top-down approach, the calculation begins with total revenues. It deducts various costs, including the cost of goods sold, selling, general, and administrative expenses, depreciation, and other operating expenses. The resulting figure is reported as EBITA (Earnings Before Interest, Taxes, and Amortization). Taxes on EBITA and any increases in deferred taxes are then adjusted to arrive at NOPLAT. This method is straightforward, focusing on revenue generation and the associated costs.

Conversely, the bottom-up approach starts with net income. It adds back components that may distort the true operating performance, such as increases in deferred taxes, goodwill amortization, extraordinary items, and minority interest income. After adjusting net income, interest expense after tax is added to derive the adjusted net income. Finally, this figure is used to calculate total income available to investors, leading again to NOPLAT.

The slide effectively illustrates that both methods yield the same NOPLAT figure, reinforcing the importance of understanding both perspectives in financial analysis. This duality allows stakeholders to choose the approach that best aligns with their analytical needs or reporting standards. The visual representation aids in grasping the calculation process, making it a valuable reference for financial professionals seeking clarity in NOPLAT determination.

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Shareholder Value Value Creation Financial Analysis