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After Tax Operating Income (ATOI)

After Tax Operating Income (ATOI)

The thing Is Pursuing Tax Operating Income (ATOI)?

After-tax operating income (ATOI) is a company's total operating income after taxes. This non-GAAP measure avoids any after-tax benefits or charges like effects from accounting changes.

The Formula for ATOI Is:

Where operating income is (gross revenue - operating expenses - depreciation), otherwise called the pre-tax operating income (PTOI).

Understanding After Tax Operating Income

The operating income is a measure of the amount of a company's revenue will eventually become profit. After-tax operating income (ATOI) measures a company's ability to generate income from its operations for a predetermined time frame period. It is essentially the operating income (or loss) generated by a company after considering in the effect of taxes. In effect, it is earnings before interest and taxes (EBIT), adjusted for taxes. Hence, it can likewise be calculated as:

A few analysts decide to utilize the effective tax rate of the firm, others opt for the marginal tax rate. Besides, some work out after-tax operating income as:

The after-tax operating income can likewise be defined as earnings before interest and after taxes (EBIAT). It measures a company's profitability without considering the capital structure (debt to equity). ATOI is an estimate of after-tax cash flows without the tax advantage of debt. A company that doesn't have debt, will have its ATOI equivalent its net income after tax (NIAT).

Due to its non-GAAP nature, what is incorporated and excluded in the measure varies across companies and industries, thusly, it is important to comprehend how the company under analysis showed up at its ATOI value.


ATOI as net operating profit after tax (NOPAT) is utilized to compute free cash flow to firm (FCFF), which equals net operating profit after tax, minus changes in working capital. It is additionally utilized in the calculation of economic free cash flow to firm, which equals after-tax operating income minus capital. The two measures are essentially utilized by analysts searching for acquisition targets since the acquirer's financing will supplant the current financing arrangement.

The ATOI isn't as usually utilized in that frame of mind as the pre-tax operating income (PTOI) measure, notwithstanding, it is checked closely as it addresses cash accessible to pay creditors assuming that there is ever a liquidation event. While operating income before taxes regularly shows up straightforwardly on the income statement, after tax operating income doesn't. As the primary formula introduced shows, ATOI can be calculated from PTOI by working out the tax liability explicitly for the pre-tax income figure and taking away that tax figure from the pre-tax income figure.


  • ATOI is more useful to investors since it incorporates the effect of taxes and other oddball things that could skew operating income.
  • Operating income measures the amount of profit realized from a business' operations.
  • Operating income takes a company's gross income, which is equivalent to total revenue minus COGS, and deducts every operating cost.