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Unformatted text preview: attract suppliers of funds, and to reward them adequately. Return on invested capital is the prime measure of company performance. The analyst uses it as an indicator of managerial effectiveness, and/or a measure of the company's ability to earn a satisfactory return on investment. 3. If the investment base is defined as comprising net operating assets, then net operating profit (e.g., before interest) after tax (NOPAT) is the relevant income figure to use. The exclusion of interest from income deductions is due to its being regarded as a payment for the use of money from the suppliers of debt capital (in the same way that dividends are regarded as a payment to suppliers of equity capital). NOPAT is the appropriate amount to measure against net operating assets as both are considered to be operating....
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This note was uploaded on 02/16/2012 for the course FINA 470 taught by Professor Austin during the Fall '11 term at South Carolina.
- Fall '11